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March 10, 2017

U.S. Added 235,000 Jobs in February; Unemployment Rate 4.7%

The pace of job creation remained robust in February as low unemployment drove up worker pay, evidence of continued health in the U.S. labor market that would likely clear the way for the Federal Reserve to raise short-term interest rates next week.

Nonfarm payrolls rose by a seasonally adjusted 235,000 in February from the prior month, the Labor Department said Friday. The unemployment rate ticked down to 4.7% as both workforce participation and employment rose.

Economists surveyed by The Wall Street Journal had expected 197,000 new jobs and a jobless rate of 4.7% in February.

A tightening job market is putting upward pressure on long sluggish wage growth. Average hourly earnings for private-sector workers rose 0.2% in February from the prior month, a little below economists’ expectation for a 0.3% gain, and wages were up 2.8% from a year earlier.

Fed policy makers are scheduled to meet Tuesday and Wednesday in Washington. They signaled in recent weeks that a rate increase was likely imminent, barring some unexpected development, and investors have come to expect action next week. On Thursday, fed-funds futures tracked by CME Group suggested the probability of a March rate increase was just under 90%.

Fed Chairwoman Janet Yellen said last week that officials would “evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal-funds rate would likely be appropriate.” Ms. Yellen said inflation “seemed to be moving toward” the Fed’s 2% annual target, and that monthly jobs gains in the range of 75,000 to 125,000 would be consistent with underlying population growth.

Hiring in February far exceeded that level, and Friday’s report offered fresh evidence of low unemployment and firming wage growth as well.

The Labor Department said December nonfarm payrolls were revised down to a gain of 155,000 and January’s growth was marked up to 238,000, a net increase of 9,000 from prior estimates for the two-month span. Job growth over the past three months averaged 209,000.

Job gains in February were broad across most sectors, including a second straight month of strong construction hiring that may have reflected mild winter weather across much of the U.S. Private nonfarm payrolls rose by 227,000 from January, and government employment was up 8,000.

The federal government added 2,000 jobs last month. President Donald Trump on Jan. 23 ordered federal agencies to stop filling vacant positions, with some exceptions.

The labor-force participation rate in February was 63.0%, ticking up from the prior month. Workforce participation has stabilized for a year and a half following a long decline, though forecasters believe long-run forces including the aging of the U.S. population will push it down further in the coming years.

A broad measure of unemployment and underemployment known as the U-6, which includes Americans working part time because they can’t find full-time jobs, was 9.2% in February. It was 9.8% a year earlier.

Some labor-market measures continue to show lingering damage from the 2007-2009 recession. About 23.8% of unemployed Americans in February had been out of work for longer than six months, an elevated rate of long-term unemployment compared with prerecession levels.

Overall, though, the U.S. labor market has continued to improve in recent years.

Hiring slowed last year from its pace in 2014 and 2015 but remained well above the pace needed to keep up with population growth. Initial jobless claims have hovered near multidecade lows, indicating a low level of layoffs across the economy. Many employers have started offering higher wages to attract and retain workers in a tighter job market.

Two Men and a Truck, a Lansing, Mich.-based moving company, plans to hire 3,000 workers at its franchises across the country by the start of the summer moving season. Chief Executive Jeff Wesley said, facing a tighter labor market in recent years, the firm has raised pay and offered more training as it hires less experienced workers. “We have to work harder to find the people we need,” he said. “It is more challenging than it was five years ago.”

Still, broader economic growth remains subdued. Gross domestic product, a measure of the goods and services produced across the U.S., has averaged 2.1% annual growth since the recession ended in mid-2009.

In the final three months of 2016, GDP expanded at a 1.9% seasonally adjusted annual rate, and there has been little sign of a pickup in the early months of 2017. The Federal Reserve Bank of Atlanta’s GDPNow model this week estimated first-quarter growth at a 1.2% pace.

The stock market, as well as gauges of U.S. consumer and business sentiment, rose sharply following the November presidential election. Some forecasters have raised their expectations for U.S. growth in anticipation of tax cuts, regulatory rollbacks and other measures that the Trump administration has said it would pursue.

But the timing and details of any policy changes, and how they might affect the economy in the near and long term, remain uncertain for now.

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