If the economy is slowing down, nobody told the labor market.
Employers added 275,000 jobs in February, the Labor Department reported Friday, in another month that exceeded expectations even as the unemployment rate rose.
It was the third straight month of seasonally adjusted gains above 200,000, and the 38th consecutive month of growth — fresh evidence that four years after going into pandemic shutdowns, America’s jobs engine still has plenty of steam.
“We’ve been expecting a slowdown in the labor market, a more material loosening in conditions, but we’re just not seeing that,” said Rubeela Farooqi, chief economist at High Frequency Economics.
Previously reported figures for December and January were revised downward by a total of 167,000, reflecting the higher degree of statistical volatility in the winter months. That does not disrupt a picture of consistent, robust increases.
At the same time, the unemployment rate, based on a survey of households rather than businesses, increased to a two-year high of 3.9 percent. The increase from 3.7 percent in January was driven by people losing or leaving jobs as well as those entering the labor force to look for work.
A more expansive measure of slack labor market conditions, which includes people working part time who would rather work full time, has been steadily rising and now stands at 7.3 percent.
In a positive sign, the labor force participation rate for people in their prime working years — ages 25 to 54 — jumped to 83.5 percent, matching a level from last year that was the highest since the early 2000s. The participation rate for those over age 55 remains markedly below its prepandemic level, potentially in part because the booming housing and stock markets have allowed more people to retire.
Average hourly earnings rose by 4.3 percent over the year. Wages have outpaced prices since May, though the pace of increases has been fading.
“We’ve recently seen gains in real wages, and that’s encouraged people to re-enter the labor market, and that’s a good development for workers,” said Kory Kantenga, a senior economist at the job search website LinkedIn. As wage growth slows, he said, the likelihood that more people will start looking for work falls.
As late as last fall, economists were predicting much more modest employment increases, with hiring concentrated in a few industries. Some pandemic-inflated industries have shed jobs, but expected downturns in sectors like construction have not materialized.
The last few months have been studded with strong economic data, prompting analysts surveyed by the National Association for Business Economics to raise their forecasts for gross domestic product and lower their expectations for the trajectory of unemployment. Inflation has eased, leading the Federal Reserve to telegraph its plans for interest rate cuts sometime this year, which many see as insurance should the job market stumble.
Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, helped tabulate the survey responses. He said the mood was buoyed partly by fading trepidation over federal government shutdowns and draconian budget cuts, after several close calls since the fall. And there’s no harm, he said, in a tamer but more sustainable pace.
“If we gain 150,000 jobs every month this year, that would still be an incredible year, but it would still be cooling compared to last year,” Mr. Jebaraj said. “And maybe we want both things.”
Moreover, some of the cooling may have allowed for more durable growth. As extreme labor shortages eased and the wave of job quitting subsided, employers unable to win bidding wars for workers have had an easier time filling positions. And as people stick around longer, productivity has improved, which makes it easier to pay more without increasing prices.
Health care and government again led the payroll gains in February, while construction continued its steady increase. Retail, restaurants, transportation and warehousing, which have been flat to negative in recent months, picked up.
No major industries lost a substantial number of jobs. High interest rates continue to suppress manufacturing, however, while credit intermediation continued its downward slide — that sector, which mostly includes commercial banking, has lost about 123,000 jobs since early 2021.
Few businesses are more emblematic of the power behind recent employment gains than home health services for older people, which count 164,000 more jobs than before the pandemic — fully offsetting the decline of nursing and residential care facilities, which have been less popular since Covid-19 ripped through them in 2020.
Elaine Flores is the chief operating officer of Medical Home Care Professionals, an agency in Redding, Calif., that employs 102 clinical staff members and caregivers. That’s up about 20 percent since early 2020, though the net gain underestimates how many people she’s had to hire as experienced providers have left the profession.
“More and more nurses are retiring out,” Ms. Flores said. “That’s probably the most difficult discipline to recruit, and we compete against hospitals, which have beautiful benefits packages that, on home health margins, we can’t do.”
Elevated levels of immigration may help with that problem in the coming years. According to an analysis by the Brookings Institution, the influx over the last two years has approximately doubled the number of jobs that the economy could add per month in 2024 without putting upward pressure on inflation, to a range of 160,000 to 200,000.
That does not mean the employment landscape looks rosy to everyone. Employee confidence, as measured by the company rating website Glassdoor, has been falling steadily as layoffs by tech and media companies have grabbed headlines. That is especially true in white-collar professions like human resources and consulting, while those in occupations that require working in person — such as health care, construction and manufacturing — are more upbeat.
“It is a two-track labor market,” said Aaron Terrazas, Glassdoor’s chief economist, noting that job searches are taking longer for people with graduate degrees. “For skilled workers in risk-intensive industries, anyone who’s been laid off is having a hard time finding new jobs, whereas if you’re a blue-collar or frontline service worker, it’s still competitive.”
Those having a hard time finding steady employment turn increasingly to gig work, Mr. Terrazas noted, which is not picked up in the payrolls data. That has been true for Clifford Johnson, 70, who retired from his accounting job in Orlando, Fla., three years ago and began drawing Social Security.
The outlook changed when Mr. Johnson separated from his husband and had to rent an apartment, which in the hot Orlando housing market costs $2,350 a month. He has not landed another accounting job, and a retail position did not work out. He has run through his limited savings, and for now he drives for Uber Eats full time — even on the weekend — to stay afloat.
“I’m just doing what I can do to make money every day,” Mr. Johnson said. He’s hoping a couple of contract accounting positions come through, since driving that much is physically exhausting. “If you’re 25 or just graduating from college, it’s a lot different than if you’re 70 and still trying to make a living.”
The path forward for the labor market, which few have managed to accurately predict, remains hazy. Every seeming threat so far — including wars, substantial interest rate increases and bank collapses — has been met with unflappability.
Thomas Simons, senior economist at the investment banking firm Jefferies, thinks the economy will look weaker at the end of the year than it does now, despite the lack of any obvious potholes.
“It’s been 30-plus years since we’ve had an economic cycle like this, where we are waiting for enough drag to coalesce between different sectors to take the whole number down,” Mr. Simons said. “I still believe it’s unlikely that it’s going to continue indefinitely, even without a discrete catalyst.”