US economy reaches its highest job creation rate in a year and a half

The US economy added 313,000 new jobs in February, marking the biggest increase in more than a year and a half, but the slowdown in wage gains points to a gradual increase in inflation this year.

US nonfarm payrolls jobs rose by 313,000 jobs last month, strongly supported by the biggest rise in construction jobs since 2007, according to the US Department of Labor on Friday. The labor market benefits from strong domestic demand and has improved global growth as well as strong corporate sentiment after the $1.5 trillion income tax cut from the Trump administration from January.

Average hourly wages rose by 4 cents or 0.1 percent to $26.75 in February. This led to an annual increase in average hourly income to 2.6%, from 2.8% in January. The unemployment rate, which remained at its lowest level in 17 years, remained unchanged at 4.1% in February. This was the fifth straight month,The average workweek recovered to 34.5 hours after falling to 34.4 hours in January.

With Fed officials moving through the labor market, moderation in wage growth last month did not change the belief that the US central bank will raise interest rates at its March 20-21 monetary policy meeting. However, the slow growth in wages may weaken expectations that the Federal Reserve will raise its interest rate forecast to four hikes this year from three. There is optimism that tightening labor market conditions will stimulate faster wage growth this year and lead inflation to the Fed’s target of 2 percent.

While employment gains clearly point to the underlying strength of the economy, wage gains remain silent enough for the Fed to continue to gradually normalize its policy stance.

Federal Reserve Chairman Jerome Powell has raised speculation that the central bank will increase its interest rate projections when he told legislators last week that “[his] personal outlook for the economy has strengthened since December”.

Economists had expected jobs to rise by 200,000 jobs last month and the unemployment rate to fall to 4.0 percent. Data for December and January were revised to reflect that the economy added 54,000 more jobs than previously reported

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