U.S. payrolls rise sharply in February, wage pressures likely to accelerate in months ahead

Payrolls in the U.S. rose sharply in February, rising 313k against expectations for a 200k increase. Gains were greatly in the private-sector hiring, and upward revisions to the prior two months added another 54k jobs.

The jobless rate continued to be the same at 4.1 percent as increased numbers of new workers entered the labor force. The labor force participation rate rose to 63 percent in February, re-attaining its post-recession peak. In all, participation in the labor force has been fairly stable since early 2016; however, that hides an encouraging upward trend for core-age workers, which is being countered by huge cohort of baby boomers entering retirement.

The focus was on wage growth mainly, which rose moderately by 0.2 percent sequentially in February. That left average hourly earnings up 2.6 percent, a slight slowdown from 2.8 percent in January. Still, wages have risen at an annualized rate of 3 percent over the past three months.

Payroll gains were widespread, with hiring in both good and services sector accelerating. Construction, retail trade, professional and business services, manufacturing, financial activities, mining and health care were leading.

The job market has certainly got off to a roaring start in 2018. Hiring has risen in recent months, driven by an acceleration in goods sector hiring, and the mining and manufacturing sectors in particular. Still, the jobless rate has continued to be stable at 4.1 percent, as growth in the labor force has also gained speed, noted TD Economics in a research report.

The trend over the past few months has been optimistic. With hiring growth like this, wage pressures are bound to accelerate further in the months ahead, which should continue to draw people off the sidelines and into the workforce, stated TD Economics.

“There is little debate that the Fed will hike in March. Our latest forecast calls for three hikes in total over 2018 (see Dollars & Sense), but if this momentum continues, there is certainly an upside risk to this view”, added TD Economics.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -47.9746. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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