Job market still chugging even as economic risks grow

Hiring across the U.S. surged last month as the economy continued to recover from a labor market slowdown caused by the COVID-19 Omicron variant.

Payrolls grew by 678,000 in February, the Labor Department reported on Friday, exceeding analyst forecasts of around 440,000 jobs. That's an increase of 200,000 from the previous month and the strongest month for hiring since October of last year. The unemployment rate fell to 3.8% as more workers found jobs. That is the lowest jobless rate since February of 2020, just before the pandemic took hold in the U.S.

"There's very strong levels of demand for workers," Nick Bunker, head of research at the Indeed Hiring Lab, told CBS MoneyWatch. "This year could be one where we, by many metrics, get back to pre-pandemic levels."

The gains were broad-based. Leisure and hospitality companies added about 180,000 jobs as restaurants and bars continued to reopen. Professional and business services firms added 95,000. Construction and health care businesses each added about 60,000 jobs, while the transportation and warehousing sector added nearly 50,000. 

"February marked the tenth consecutive month with payroll gains in excess of 400,000, the longest run of such robust job growth on record going back to 1939," analysts at Morgan Stanley said in a research report.

If hiring continues at the same rate, the economy is on track to recover all the jobs it lost in 2020 by this summer, just over two years after the pandemic began.

Wages decelerate

Despite higher overall hiring, February's job report showed some pockets of weakness. The employment-to-population ratio rose for most demographic groups but fell for Black women. The unemployment rate for Black men fell, but at 6.6% it was more than double the unemplyoment rate for White men.

"Black men are coming back to work but they're not finding jobs in numbers that are significantly high enough," said Jane Oates, president of WorkingNation. 

Wage growth slowed down from its pace earlier this year, with average wages for non-managerial workers rising 6.5% year-over-year.

The moderating wage growth is likely a result of measurement errors as well as a growing supply of workers in the job market, allowing employers greater options to hire. Still, economists predict that increased demand from consumer spending, as well as persistently high inflation, will create pressures for employers to keep raising pay to retain workers.

"There are a lot of people in the job market right now who, in their lifetime, have not experienced this kind of inflation. So firms are going to have to raise their wages in order to get those people come back to work," said Giacomo Santangelo, economist for job site Monster.

Geopolitical uncertainty

Despite the economy's remarkable turnaround last year, economists warn that fierce inflation, soaring oil prices and a shift in monetary policy, exacerbated by the war in Ukraine, could soon dampen hiring.

The Federal Reserve is expected to start raising interest rates later this month as it seeks to tamp inflation, which is at its highest level in 40 years.

The latest signs of robust job growth are also based on data collected in mid-February, before Russia's February 24 invasion of Ukraine. It's uncertain how the conflict will affect U.S. hiring, but economists warn that rising oil and prices and ongoing disruptions to global supply chains could crimp job growth in the months ahead.

This is a developing story. The Associated Press contributed reporting.