America’s employers added 262,000 jobs in February, the best showing in four months, although the surge in hiring was not enough to accommodate a wave of job seekers that sent the jobless rate slightly higher.
Stock prices soared on the news, which was better than expected, even though the unemployment rate rose to 5.4 percent from 5.2 percent in January, according to the Labor Department report released Friday.
"The stock market had to love the number," said John Silvia, chief economist for Wachovia Securities. "They got exactly what they wanted. ... It's very positive for the overall economy."
The Dow Jones industrial average rose more than 100 points to close at its highest level in nearly four years.
Investors were heartened that while hiring increased other figures in the employment report showed there is little danger of wage inflation that would force the Federal Reserve to raise interest rates more aggressively, analysts said.
"On the one hand the Fed needs to hike rates to match the strength in the economy. On the other hand they don’t need to be in any hurry," said Ethan Harris, chief U.S. economist for Lehman Bros.
Most analysts said they did not expect employment to continue growing at February's pace, but the results were a relief after a string of subpar reports in an economic expansion that has been marked by cautious hiring. Since mid-2004, the economy has added an average 160,000 jobs a month, only a bit more than is needed to keep up with the nation's growing labor force.
The February results probably were boosted in part by a snap-back after bad weather dampened construction hiring earlier in the year, but Harris pointed out that other figures including weekly jobless claims show an increasing demand for labor across a number of industries.
"If you look broadly, it does seem there is a legitimate pickup going on in the job market," he said.
The latest snapshot of the country’s employment climate showed job gains across a range of industries — from manufacturing and construction to retail and business services.
The manufacturing sector, which has been hit hard by job losses since the recession of 2001, added 20,000 positions last month. Construction firms added 30,000, retailers added 30,000, and professional and business services boosted employment by 81,000, up from 24,000 in January.
Workers’ average weekly earnings held steady in February at $535.83, unchanged from January’s figure.
Joel Naroff of Naroff Economic Advisors said the flat wages — along with the increase in the unemployment rate — show there are still plenty of people looking for work.
"If businesses were having trouble getting workers, we wouldn't have flat wages," he said.
Goldman Sachs chief U.S. economist Bill Dudley said the latest economic reports were "made to order" for Fed Chairman Alan Greenspan and his campaign to steadily raise short-term interest rates from last year's historically low levels.
The Greenspan-led Fed has hiked its benchmark overnight rate a quarter-point at each of the last six meetings of policy-makers, and analysts expect another half-dozen increases before the current cycle ends. The Fed is almost certain to raise rates by another quarter-point at the next scheduled meeting March 22, analysts say.
There is "nothing here to warrant the Fed having to tighten aggressively," said David Rosenberg, chief North American economist Merrill Lynch.
The rise in the unemployment rate came in part as more job-seekers streamed back into the market.
The unemployment rate is calculated from a separate statistical survey than the payroll figures. Thus, they can offer somewhat different pictures of what is happening in the labor market.
In other economic news, U.S. factories saw orders for goods rise by 0.2 percent in January, following a 0.5 percent rise in December. Gains in January reflected stronger demand for “non-durable” goods, such as food, leather products and chemicals.
Economists believe the economy in the January-to-March quarter is growing at a rate of around 4 percent, which would be a sufficient pace to spur solid job creation.