As Fed Prepares Interest Rate Hike, US Gains 678,000 Jobs

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More Americans are venturing into restaurants and stores as the push for the omicron variant wanes in the United States, spurring economic growth.

WASHINGTON — U.S. employers added 678,000 jobs in February, another gain that underscored the solid health of the economy as the omicron wave wanes and more Americans venture to spend in restaurants, shops and hotels despite soaring inflation.

The Labor Department report on Friday also showed the jobless rate rose from 4% to 3.8%, extending a sharp drop in unemployment as the economy rebounded from the pandemic recession.

The latest jobs data follows recent reports that showed the economy holding strong as new COVID infections have fallen since late January. Consumer spending increased, boosted by rising wages and savings. Restaurant traffic is back to pre-pandemic levels, hotel reservations are up, and far more Americans are flying than during omicron’s heyday.

The average hourly wage barely rose last month, but rose 5.1% over the past year, a sign that companies feel pressured to raise wages to attract and keep workers. Many employers, in turn, raised prices to offset their higher labor costs, a process that fueled inflation.

Consumer inflation has reached its highest level since 1982, crushing American households and businesses, with particularly high price spikes for necessities such as food, gas and rent. In response, the Federal Reserve is expected to raise interest rates several times this year starting later this month. These increases will eventually translate into higher borrowing rates for consumers and businesses, including homes, cars and credit cards.

Chairman Jerome Powell said this week that he plans to offer the Fed a quarter-point hike in its short-term policy rate when it meets in about two weeks. Powell acknowledged that high inflation has proven more persistent and spread more widely than he and many economists expected.

The Fed chairman warned that if inflation does not come down later this year as he expected, he would consider making half-point increases at future central bank meetings. Larger increases would increase the risk of weakening the economy or even tipping it into recession.

Powell also warned that Russia’s invasion of Ukraine would drive up gas prices as well as other commodities like aluminum, wheat and corn, keeping inflation higher than ever. it would not have been otherwise. Oil prices, which have soared since the start of the war more than a week ago, are of crucial importance for the world economy.

For now, however, despite high inflation, the rapid demise of the omicron variant is likely to accelerate the US economy and job growth. An Associated Press-NORC Center for Public Affairs Research survey found that Americans are now far less concerned about COVID than they were in December and January. Mask mandates and other restrictions end. More businesses are resuming pre-pandemic operations, including working in offices.

Data from restaurant reservation software provider OpenTable showed seated diners surpassed pre-pandemic levels late last month. And figures from the Transportation Security Administration reflect a sharp increase in the number of people willing to fly.

During the omicron wave, businesses barely faltered in their demand for labor. Job vacancies at the end of December reached near record highs, with an average of 1.7 vacancies available for each unemployed person. Historically, there are generally more unemployed people than jobs.

As many companies desperately seek employees, layoffs have plummeted. The number of people receiving unemployment benefits fell two weeks ago to its lowest level since 1970.

Americans’ worries about inflation have eroded their optimism about the economy. The Conference Board’s measure of consumer confidence slipped in February for a second straight month.

Yet other polls show that Americans are increasingly satisfied with their own financial situation. And people clearly see that there are plenty of jobs available, the Conference Board survey shows.

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