February Jobs Report: Economy Sailing Through Deep But Steady Waters

By Bernard E. Anderson, PhD
Whitney M. Young Professor Emeritus, The Wharton School of the University of Pennsylvania
Chief Economic Advisor, National Urban League

In February, payroll employment rose by 275,000 jobs, the unemployment rate edged up to 3.9% but remained below the rate considered full employment, and average hourly earnings grew 0.1 percent to $ 34.57 week – all of which suggests that the economy is approaching a soft landing in the post pandemic business cycle.
 
One of the benefits of stable, balanced growth is the narrowing of the racial unemployment gap.  In the last year, the Black/White unemployment gap dropped from the persistent 2:1 ration to an average of 1:65.  The narrowing of the racial unemployment gap not only reflects the impact of both vigorous employment growth and tight labor markets, but also strong advocacy of diversity, equity, and inclusion in private and public employment practices.  The racial employment gains are also dependent upon increased labor force participation especially among prime age Black women and widening opportunities in industry and occupational employment for Black workers.
 
The economy is sailing through deep but steady water. In late 2023, the personal consumer expenditure index (PCE), the measure the Federal Reserve uses to set interest rates, rose 2%.  Real GDP grew 3.3 %, and consumer spending remained strong despite continuing elevated inflation. CPI was running hotter than PCE, rising above 3.0 percent.
Job growth was distributed broadly across a number of industries led by double digit gains in health care (67,000), government (52,000), and food and drinking places (42,000). Notable gains also were reported in construction, transportation/warehouses, and professional/financial services.  There was positive but little change in other major industries.

In short, the economy is on the path of sustainable noninflationary growth.  But unforeseen developments, including the shutdown of the federal government spurred by disagreement over the federal budget would create turbulent waters.  Political actions are unpredictable.

Given the totality of data, it is likely that the Federal Reserve will ease restrictive monetary policy and cut interest rates at the June meeting.  That will be consistent with the Fed’s obligation to implement the dual mandate of price stability and maximum employment.
 
That is a welcome and hopefully continuing trend that will contribute to greater economic security, income, and wealth for those who for many years have labored in the vineyard with little opportunity to improve their income and quality of life.