February’s blockbuster gain of 313,000 jobs shows that the continually improving economy is drawing large numbers of American workers back into the labor force.
Friday's monthly jobs report from the Department of Labor ignited Wall Street, sending the Dow Jones up by 400 points by mid-afternoon and pushing the Nasdaq index to a record high.
“Today’s report shows that if you run the economy hot, we can still bring in some sidelined workers,” said Andrew Chamberlain, chief economist at Glassdoor.com. “A big jump in the labor force participation rate is very unusual for this late in the cycle. This is probably partly due to the big fiscal stimulus that was recently passed.”
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“At this rate of job growth, unemployment is going into the threes, and wage growth is going to accelerate — it’s just a matter of time,” said Mark Zandi, chief economist at Moody’s Analytics.
Zandi noted that the labor force participation rate rising to 63 percent, and the overall labor force increase of 806,000 in February. “It means this labor market is now reaching everybody. It’s even including people who are really on the fringes,” he said.
Guy Berger, chief economist at LinkedIn, said the fact that these gains took place even with the headwind of retiring Baby Boomers departing the workforce was all the more remarkable.
“It’s still nice to know the economy’s capable of doing that, even this far into the recovery,” he said. ”The unemployment rate may be super-low, but there’s still enough slack in the labor market that we’re not really seeing signs of overheating.”
Last month’s annualized wage growth of nearly 3 percent stoked inflation fears on Wall Street, triggering broad selloffs. February’s numbers were more reassuring, with wage growth settling back down to an annualized rate of 2.6 percent. Economists called this a good sign, both because it reflected a lower inflation risk than the previous month’s data suggested, and added support to indications that marginalized workers were being induced to return to work.
“A greater supply of workers is going to pull down pricing,” said Sameer Samana, global equity and technical strategist for Wells Fargo Investment Institute. “By definition, they probably have a skill set that’s not as well suited, and they may not be able to command the same wage level.”
Eventually, as these workers are absorbed, wage gains will pick back up, Zandi predicted. “I don’t think you’re going to hold back the wage growth for very long,” he said. “By the end of the year, we’ll be firmly over 3 percent.”