The jobs report was exactly what Wall Street wanted.
The Dow surged 161 points after the Labor Department reported the economy gained 313,000 jobs in February, its best month since July 2016.
Wages grew a somewhat tepid 2.6% in February compared with a year before. That’s less than economists predicted and slower than the 2.9% rise in January, which set off fears on Wall Street about rising inflation and the possibility of interest rate hikes.
“Overall the February jobs report is the best of both worlds — strong job growth without accelerating wage inflation — It’s not too hot not too cold, a Goldilocks report,” said Alec Young, managing director of Global Markets Research.
The report could ease short term concerns that the Federal Reserve will be forced to speed up interest rate rises.
The Fed in February forecast raising rates three times this year. But if wages continue to pick up and the specter of inflation rises above the Fed’s 2% target, it could raise rates at a faster pace. That would make the cost of borrowing more expensive. Corporate America has feasted on historically low rates.
“The market is hyper sensitive to inflation and signs that inflation is climbing higher at a faster pace,” said Quincy Krosby, chief market strategist at Prudential Financial.
The yield on the 10-year U.S. Treasury note, which reflects investors’ expectations of further rate hikes, remained steady at 2.89%. The market is slowly adjusting to higher bond yields.
PNC chief economist Gus Faucher said the report is more proof that the job market is tightening. That will put pressure on employers to raise wages.
