WASHINGTON (AP) — U.S. employers added a robust 235,000 jobs in February and raised pay at a healthy pace, making it all but certain that the Federal Reserve will raise short-term interest rates next week.
Friday’s jobs report from the government made clear that the economy remains on solid footing nearly eight years after the Great Recession ended.
The unemployment rate dipped to a low 4.7 percent from 4.8 percent, the Labor Department said. More people began looking for jobs in February, a sign of confidence that raised the proportion of Americans working or seeking work to the highest level in nearly a year.
The gains in hiring and pay, along with higher consumer and business confidence since the November election, could lift spending and investment in coming months and accelerate economic growth. Americans are buying homes at a solid pace, and manufacturing is rebounding, in part because of improving economies overseas.
Investors responded initially by sending stock prices up sharply Friday. By late morning, though, stock indexes were up only slightly.
The February jobs data likely provides the final piece of evidence the Fed needs to feel confident enough to raise rates next week for the third time in 15 months. The Fed’s inclination to tighten borrowing rates reflects how far the economy has come since the central bank cut its benchmark short-term rate to zero in 2008 and kept it there for seven years to support a fragile economy.
In December, Fed policymakers forecast that they would raise rates a total of three times this year, which would lead eventually to higher loan rates for homes and cars as the economy further solidifies its gains. Friday’s figures make additional rate hikes this year more likely, economists said.
“Job growth continues to offer a positive reflection on underlying economic conditions,” said Russell Price, an economist at Ameriprise Financial. “There are few factors more important to consumers than jobs. Overall, consumers are in great shape to support an accelerated pace of economic growth.”
Average hourly pay rose 2.8 percent year over year in February, a decent gain though slightly below historical averages. In a healthy economy, wages typically rise at a roughly 3.5 percent annual pace.
Last month’s hiring was boosted by 58,000 additional construction jobs, the most in nearly a decade. That figure was likely enhanced by unseasonably warm weather in much of the nation.
Friday’s report was the first to cover a full month under President Donald Trump. During the presidential campaign, Trump had cast doubt on the validity of the government’s jobs data, calling the unemployment rate a “hoax.” But just minutes after Friday’s report was released at 8:30 a.m. Eastern time, Trump retweeted a news report touting the job growth.
An array of evidence suggests that the U.S. job market is fundamentally healthy or nearly so. Hiring over the past two months has averaged 237,000, up from last year’s monthly average of 187,000.
The number of people seeking first-time unemployment benefits — a rough proxy for the pace of layoffs — reached a 44-year low two weeks ago.
Business confidence has risen since the presidential election, with many business executives saying they expect faster economic growth to result from Trump’s promised tax cuts, deregulation and infrastructure spending.
The U.S. economy is also benefiting from steadier economies overseas. Growth is picking up or stabilizing in most European countries as well as in China and Japan.
The 19-nation alliance that uses the euro currency expanded 1.7 percent in 2016, an improvement from years of recession and anemic growth. Germany’s unemployment rate has fallen to 3.9 percent, although in crisis-stricken Greece, unemployment remains a painful 23 percent.
In the United States, employers have been hiring solidly for so long that in some industries, they’re being compelled to raise pay. Hourly wages for the typical worker rose 3.1 percent in 2016, according to a report this week by the Economic Policy Institute. That’s much higher than the 0.3 percent average annual pay gain, adjusted for inflation, since 2007, the EPI said.
Minimum wage increases last year in 17 states and Washington, D.C., helped raise pay among the lowest-paid workers, the EPI found. Pay increases for the poorest 10 percent of workers were more than twice as high in states where the minimum wage rose as in states where it did not.
At the start of 2017, minimum wages rose again in 19 states, a trend that might have helped raise pay last month.
U.S. builders are breaking ground on more homes, and factory production has recovered from an 18-month slump, fueling growth and hiring. In February, manufacturing expanded at the fastest pace in more than two years, according to a trade group. Businesses have stepped up their purchases of industrial equipment, steel and other metals, and computers.
And in January, Americans bought homes at the fastest pace in a decade despite higher mortgage rates. That demand has spurred a 10.5 percent increase in home construction in the past 12 months.