WASHINGTON — A burst of hiring last month added 236,000 U.S. jobs and reduced the unemployment rate to 7.7 percent from 7.9 percent in January. The robust gains suggested that the economy can strengthen further despite higher taxes and government spending cuts.
The February jobs report issued Friday by the Labor Department provided encouraging details: The unemployment rate is at its lowest level in four years. Job growth has averaged more than 200,000 a month since November. Wages rose. And the job gains were broad-based, led by the most construction hiring in six years.
Employers have been emboldened by a rebounding U.S. economy. The housing, auto and manufacturing sectors have improved. Corporate profits are strong. And the Dow Jones industrial average is at a record high.
The unemployment rate, which had been stuck at 7.8 percent or above since September, declined mostly because more people found work. Another factor was that 130,000 people without jobs stopped looking for work last month. The government doesn’t count them as unemployed.
The unemployment rate is calculated from a survey of households. The job gains are derived from a separate survey of employers.
The 236,000 jobs that were added in February is a historically solid total. And it would have been higher if governments were contributing to job growth, rather than subtracting from it as they have for nearly four years. Governments cut 10,000 jobs in February.
If federal, state and local governments were adding their long-term combined average of 20,000 to 25,000 jobs a month, February’s total job gains would have been around 260,000.
Hiring has accelerated since summer. Employers added an average of 205,000 jobs a month from November through February. They had averaged 154,000 gains from July through October and 132,000 from March through June.
Stock prices rose modestly Friday after the report was released at 8:30 a.m. Eastern time. Another day of stock gains would give the Dow Jones industrial average its fourth straight record close.
The government said employers added slightly fewer jobs in January than the government had first estimated. Job gains were lowered to 119,000 from an initially estimated 157,000. Still, December hiring was a little stronger than first thought, with 219,000 jobs added instead of 191,000.
Robust auto sales and a steady housing recovery are spurring more hiring, which could trigger more consumer spending and stronger economic growth. The construction industry added 48,000 in February; it’s added 151,000 since September. Manufacturing gained 14,000 jobs last month and 39,000 since November.
Retailers added 24,000 jobs, a sign that they anticipate healthy consumer spending in the coming months. Education and health services gained 24,000. And the information industry, which includes publishing, telecommunications and film, added 20,000, mostly in the movie industry.
The economy is generating more higher-paying jobs in industries like accounting, engineering and information technology. That’s raising average pay, which will help offset the hit that Americans took from higher Social Security taxes and gas prices.
Hourly wages rose 4 cents to $23.82 last month. Wages have risen 2.1 percent over the past year, slightly ahead of inflation. Higher pay is vital to the economy because consumer spending drives 70 percent of economic activity.
“We’re seeing the mix of jobs improve,” says Ryan Sweet, a senior economist at Moody’s Analytics.
The improved job market can also benefit countries that sell goods and services to U.S. consumers and businesses.
“All you have to do is look at the trade numbers,” says Bernard Baumohl, chief global economist at the Economic Outlook Group. “The strength in the U.S. economy is leading to faster growth in imports.”
Imports rose 2 percent in January from December. Those from China surged 7 percent.
‘Moving in the right direction’
A stronger U.S. economy, Baumohl says, will also help a battered Europe, which is contending with high unemployment and a debt crisis. The United States is the No. 1 market for exports from the 27-country European Union.
U.S. and Chinese demand for European goods will be vital as the 17 countries that use the euro struggle to emerge from recession. Spending cuts by indebted governments in Italy and Spain have squeezed those economies.
“The extent to which the U.S. is recovering and potentially the labor market is improving is potentially an important dynamic that Europe would welcome,” said Nick Matthews, an analyst at Nomura in London.
The U.S. economy is benefiting from the Federal Reserve’s drive to keep interest rates at record lows. Lower borrowing rates have made it easier for Americans to buy homes and cars and for companies to expand.
The Fed and key central banks overseas have taken extraordinary steps to pump money into their financial systems to try to spur borrowing and spending, boost stock prices and stimulate growth.
The Fed has said it plans to keep the benchmark rate it controls near zero at least until the unemployment rate has fallen to 6.5 percent, as long as the inflation outlook remains mild.
Friday’s jobs report isn’t expected to move up the Fed’s timetable for any rate increase.
“This may not yet be the substantial improvement in the labor market outlook that the Fed is looking for, but it’s moving in the right direction,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.
The brighter hiring picture has yet to cause a flood of out-of-work people who aren’t looking for a job to start seeking one. The proportion of Americans either working or looking for work dipped one-tenth of a percentage point in February to 63.5 percent, matching a 30-year low.
Even though the recession officially ended in June 2009, many Americans have remained discouraged about their job prospects and have given up looking. Others have returned to, or stayed in, school. And the vast generation of baby boomers have begun to retire. Their exodus reduces the percentage of adults working or looking for work.
Further strong hiring gains will hinge, in part, on healthy consumer spending. So far, higher gas prices and a Jan. 1 increase in Social Security taxes haven’t caused Americans to sharply cut back on spending.
Across-the-board government spending cuts also kicked in March 1 after the White House and Congress failed to reach a deal to avoid them. Those cuts will likely lead to furloughs and layoffs in coming weeks.
The Congressional Budget office has estimated that the cuts mean government spending will drop $44 billion in the budget year that ends Sept. 30. That reduction, slightly more than 1 percent of federal spending, will likely hold down hiring in spring and summer, Sweet says. But more hiring and pay increases now should ease the blow.
A big source of strength has been home sales and residential construction: New-home sales jumped 16 percent in January to the highest level since July 2008. And builders started work on the most homes last year since 2008.
Home prices rose by the most in more than six years in the 12 months that ended in January. Higher prices tend to make homeowners feel wealthier and more likely to spend. So do record-high stock prices.
“If my house is worth a little more, my 401(k) is going up … maybe I can afford to go buy that car, or continue to spend,” says Ed Hyland, investment specialist at JPMorgan Private Bank.