Any lingering worries about a U.S. recession were erased by another big gain in hiring in February.
The economy added 242,000 jobs last month, bouncing back from a more modest 172,000 increase in January. More than a half a million people also joined the labor force, a sign jobs are getting easier to find.
The upbeat employment report showed most companies are adding new workers at a steady clip. Firms appear to have shrugged off big losses in the stock market early in the year and mounting concerns about the health of the global economy.
“Recession chatter on the U.S. economy had a sock put in it by yet another rip-roaring jobs report,” said Douglas Porter, chief economist of BMO Financial Group.
Companies have proceeded with hiring plans because consumers spend most of their money in the U.S. on services — obtaining health care, going out to eat, getting financial advice and so forth. Far less is spent on imports.
In February, for example, health-care providers, retailers and restaurants led the way in hiring. That means more people earning paychecks, spending money and keeping the economy plowing ahead.
“American consumers are doing most of the heavy lifting in the U.S. economy,” said Nariman Behravesh, chief economist of IHS Global Insight.
Yet the February jobs report also underscored why the economy can’t achieve a higher altitude. Growth has been limited to 2% or so since the U.S. exited recession in mid-2009, just two-thirds as fast as it’s historically grown.
What’s been holding the U.S. economy back lately is a shakeout in the energy industry and more difficult times for the manufacturers.
Energy firms, the economy’s high-flyers just two years ago, have been socked by falling gas prices. They’ve cut tens of thousands of jobs and slashed spending in drilling rigs and other manufactured equipment needed to extract energy.
Manufacturers outside of the resurgent auto sector have been hit by a double whammy. The first is a plunge in orders from energy producers. Much worse has been a slump in U.S. exports triggered by a strong dollar that’s made American-made goods more expensive.
Another problem is wages. Worker paychecks are increasing just a little more than 2% a year, well below the normal gains when the economy is operating at full speed. More lower-paid service jobs and fewer well-paid positions in energy and manufacturing probably caused hourly pay to fall in February.
These headwinds aren’t enough to derail the economy. Energy and manufacturing, while important, have less influence on the broader economy than the much larger service sector. But they are big enough keep growth from reaching loftier heights.
With the jobs report out of the way, little on the economic calendar this week will offer much clue about the path ahead. Only a handful of secondary reports on consumer credit, wholesale inventories and import prices are due.
The Federal Reserve, for its part, wants to see more good economic news before it pulls the trigger on another interest-rate hike. Analysts see little chance the central bank will move in March.
“The U.S. economy continues to trudge along a path of steady, albeit, slow growth,” said Richard Moody, chief economist Regions Financial.