'Goldilocks economy': Businesses add 313K jobs in February

Some analysts looking at the jobs report that came out today are calling a "Goldilocks economy": rapid growth in the number of jobs but the growth of wages under control.

The BLS reports that the economy added an astonishing 313,000 jobs in February.  Economists, looking at wage growth for any sign of inflation, were surprised at the annualized rate of 2.6%.  In short, it's a strong sign that the economy is in a period of strong growth with no sign of slowing down.


Economists surveyed by Reuters had been expecting nonfarm payroll growth of 200,000 and the unemployment rate to decline one-tenth of a percent to 4 percent.  An increase in the labor force participation rate helped keep the headline unemployment number steady, as the number of those counted as not in the workforce tumbled by 653,000 to just over 95 million.

A separate measure that takes into account those out of the workforce and the underemployed – sometimes referred to as the "real" unemployment rate – held steady at 8.2 percent.

The labor force participation rate under Obama kept going down as more and more people dropped out of the workforce, too discouraged to look for work.  A leap of 653,000 in one month is about as good as it can get.

"The underlying economic growth is quite strong, but there's no real pressures from a wages and inflation standpoint," said Greg Peters, senior investment officer at PGIM Fixed Income.  "It's very good for risk assets."

Construction jobs led the way, with 61,000 new positions, followed by retail and professional and business services (50,000 apiece), manufacturing (31,000) and financial activities (28,000).  Health care added 19,000 while mining saw 9,000 new jobs.

"The jobs streak remains intact, and it's punctuating what has been a tremendous start to the year," said Mike Loewengart, vice president of investment strategy at E*Trade.

Investors were watching the report closely not only for clues about job growth but also whether wage pressures were continuing to build.  Wage growth came in less than expected, rising 0.1 percent for the month and 2.6 percent on an annualized basis.

The average work week rose by 0.1 hours to 34.5 hours.

Revised numbers for previous months are also spectacular:

In addition to the big job growth, previous months' counts were revised substantially higher.  December went from 160,000 to 175,000 while January saw a boost from the initially reported 200,000 to 239,000.  That brings the three-month average to 242,000.

Trump deserves the lion's share of the credit.  While his deregulation efforts are mostly tied up in the courts, the perception that government is getting out of the way has bred optimism.  The same holds true for the tax cuts.  They've been in effect only a few weeks, and businesses are planning expansion and adding workers because of the psychological lift they have given the economy.

The Fed sees no sign that wage pressures will lead to a bout of inflation, which means that interest rates will remain low, leading to even more economic activity.  Democrats will claim that the good numbers are the result of Obama's economic policies, not Trump.  But considering the fact that the Republicans have reversed many Obama-era policies, Democrats make a weak case.

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