WASHINGTON – U.S. employers are expected to follow the best three-month burst of hiring in 17 years with another solid round of job gains in February.
Still, the result is unlikely to match the furious pace of November through January, when 1 million positions were added. Economic growth probably isn’t fast enough to sustain such a large gain. And harsh winter weather might have discouraged some hiring.
Economists have forecast a job gain of 240,000 and a drop in unemployment to a near-normal 5.6 per cent from 5.7 per cent, according to the data firm FactSet. That would be evidence of a job market that continues to outshine others around the world.
The February jobs report will be released at 8:30 a.m. Eastern time.
“People are pretty optimistic about the U.S. economy, and they’re hiring,” said Frank Friedman, interim CEO of Deloitte, the consulting firm that counts 80 per cent of the Fortune 500 as clients.
A bright outlook among employers has translated into a robust average of 267,000 jobs added monthly over the past 12 months. That means there are 3.2 million more Americans earning paychecks now than at the start of 2014. That additional income, along with sharply lower gas prices, has left more Americans able to spend.
The steady hiring may also finally be forcing wages up. Average hourly earnings rose 0.5 per cent in January, the most in six years. Economists did caution against reading too much into one month’s figure. Most expect a more modest average wage gain in February.
Friday’s jobs report will come less than two weeks before the next policy meeting of the Federal Reserve, which is considering when to raise interest rates from record lows. Tim Hopper, chief economist at TIAA-CREF, suggested that the strengthening job market and tentative signs of pay increases give the Fed room to move toward raising short-term rates.
Most analysts expect the Fed to pave the way for higher rates by adjusting the statement it issues after its March meeting, to be followed by the first hike in June or September.
It may turn out that some temporary factors held back job growth in February. Snow and ice storms in the Midwest and parts of the Southeast closed some businesses and possibly delayed hiring. Boston and other parts of the Northeast have been hit by enormous snowfalls.
Investment bank UBS estimates that such factors lowered February’s job gain by 25,000. Construction companies, auto dealers, and retailers are the sectors most likely to have been affected by winter storms and unseasonably cold weather.
Several industries may also be hiring less than in recent months or even cutting back. Oil and gas drilling companies have cut jobs in response to the 60 per cent drop in oil prices since summer. Applications for unemployment aid have risen in such oil-heavy states as Texas, Oklahoma and North Dakota.
In January, retailers reported a sizable job gain, which most economists don’t think is sustainable.
Manufacturers may also have pulled back in the face of weaker growth overseas. A survey of manufacturing firms shows that export orders have shrunk for two months. The U.S. dollar has also soared in value compared with the euro and Japan’s yen, thereby squeezing profits for American multinationals that operate overseas.
Yet the U.S. job market and economy, for all their obstacles, are still outdoing those of other major nations. Though Europe and Japan are showing signs of growing more than last year, their economies remain feeble. The euro currency union’s unemployment rate has started to fall, but at 11.2 per cent it remains nearly twice the U.S. level.
The U.S. economy expanded at a breakneck annual pace of 4.8 per cent in last year’s spring and summer, only to slow to a tepid 2.2 per cent rate in the final three months of 2014. Many economists estimate that growth is picking up slightly in the current quarter to an annual rate of 2.5 per cent to nearly 3 per cent.
Still, economists remain bullish about hiring despite the slowdown in growth. The fourth quarter’s slowdown occurred largely because companies reduced their stockpiles of goods, which translated into lower factory output.
But companies focus more on consumer demand in making hiring decisions, and demand was strong in the October-December quarter. Americans stepped up their spending by the most in four years.
And though consumers are saving much of the cash they have from cheaper gas, spending in January still rose at a decent pace after adjusting for lower prices.
Mark Zandi, chief economist at Moody’s Analytics, expects the economy to grow 3 per cent this year, which would be first time it’s reached that level in a decade. That’s fast enough to support hiring of about 250,000 a month, he said.
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