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Solid U.S. job gains forecast in February; unemployment rate seen dipping to 3.9% -Breaking

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© Reuters. FILEPHOTO: An advertisement job in a restaurant aims to recruit workers in Oceanside (California), U.S.A, May 10, 2021. REUTERS/Mike Blake/File photo/File photo

By Lucia Mutikani

WASHINGTON, (Reuters) – U.S. employers are likely to have maintained a strong rate of hiring in February. This pushes the labor market closer towards maximum employment. However, rising geopolitical tensions and lower business confidence could slow down job growth over the coming months.

On Friday, the Labor Department will release an employment report that is closely watched. The report shows labor market conditions improving further. There are a resuming downward trend in unemployment and continued wage hikes due to a lack of workers.

Federal Reserve Chairman Jerome Powell said this week that the labor market was extremely tight and told Congress he supported a 25-basis point interest rate rise at the U.S. central banking’s March 15-16 policy conference. If inflation doesn’t fall as quickly as anticipated, he will be ready to “move more aggressively later.”

The oil price has risen to over $100/barrel since Russia’s war against Ukraine began last Thursday. It triggered a string of sanctions by America and its allies against Moscow.

Sung Won Sohn is a Loyola Marymount University economics and finance professor in Los Angeles. “The U.S. employment report will demonstrate that the economy continues to grow and is healthy,” he said. However, geopolitical concerns will increase inflation and have caused a great deal of uncertainty which will limit economic growth as well as jobs in the future.

A survey of establishments will likely show that nonfarm employment increased by 400,000 jobs in February, after increasing by 467,000 by January according to Reuters economists.

According to this, 2.5 million more jobs would be lost than before the pandemic. According to economists, all lost jobs should be recovered this year. The February payrolls estimate ranges from an estimated 200,000 up to a gain of 730,000.

Payrolls rose sharply in January, even though a record 3.62million people were sickly in the month’s middle. The nation was still reeling from an Omicron variation of COVID-19-related winter wave.

Since then, infections have declined dramatically. Census Bureau’s Household Pulse Survey revealed that 7.8 Million people weren’t at work in February due to caring for someone else or being sick with coronavirus symptoms. That is about 1 million more than January.

Mid-February saw the lowest number of individuals on state unemployment benefits in 52 years. Data from Homebase (a payroll tracking and scheduling company) showed significant increases in both the hours worked as well as the number of people on the job in February.

Another survey by UKG, a workforce management software company, showed that shift work recorded the largest monthly gains since spring 2020.

DOWNSIDE RISKS

However, payrolls might fall below what was expected after an Institute for Supply Management survey showed that the Institute for Supply Management found that there was a decrease in employment in the services sector in February for only the second time since last June. ISM earlier reported this week that the pace of manufacturing job growth has slowed in February.

On Wednesday, the Fed’s Beige Book Report showed that “widespread high demand for workers continued to be hampered by widespread reports of worker shortage.” End of December saw a record 10.9million job openings.

James Knightley is chief international economist for ING New York. He stated, “I am biased more toward a softer payrolls figure, but with a fairly good wage figure.” All evidence suggests that businesses are looking to hire staff, and retain them because of the high turnover statistics.

Last month’s job gains were likely to be concentrated in leisure and hospitality, as well as in retail and other industries that were most affected by Omicron in Jan. Modest gains are possible in the professional and business service employment, as ISM surveys showed that businesses were struggling to find direct workers and other labor.

From 4.0% in January, the unemployment rate will drop to 3.9%. Economists predict that the labor force participation rate, which is the ratio of Americans working age who either have a job, increased in January.

The average hourly earning is forecast to increase 0.5% in February, after rising 0.7% in January due to the shortage of workers. This would increase the annual wage growth to 5.8%, from 5.7% in January. Omicron’s home-based workers who were less well paid saw their wages rise in January.

According to economists, a Fed rate increase of 25 basis points would be supported by February’s employment reports. Financial markets have priced in a half-point hike after January’s unemployment report and high inflation readings.

This is due to concerns about the fallout from Russia-Ukraine’s war. According to economists, there will be seven rate increases this year.

Gregory Daco (chief economist, EY-Parthenon New York), stated that “Indeed the current energy price surprise creates a real problem for central banksers.” Fed policymakers must balance risky situations such as a “stagflationary” shock or a shift towards a higher inflation rate with the possibility of normalizing too quickly and precipitating tightening financial conditions.

Omicron in Jan impacted the workweek. It is now forecast that it will increase to 34.6 hours, from 34.5.

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