WASHINGTON, (Reuters) – U.S. employers stepped up hiring in February and the jobless rate fell to its lowest level since the spring before President Barack Obama took office, which could put pressure on the Federal Reserve to raise interest rates in June.
Nonfarm payrolls increased 295,000 last month after rising 239,000 in January, the Labor Department said on Friday. The broad job gains came despite disruptive winter weather that took hold across large parts of the country in mid-February.
The unemployment rate dropped two-tenths of a percentage point to 5.5 percent, the lowest since May 2008, slipping into territory that some Fed officials consider consistent with full employment.
“The labor market is on a roll. This should ease fears at the Fed that the global downturn and sharp drop in oil prices are materially disrupting the U.S. economic outlook, and keep the Fed firmly on course for a June lift-off,” said Scott Anderson, chief economist at Bank of the West in San Francisco.
U.S. stocks and shorter-dated government bonds fell sharply as traders brought forward bets on when the Fed would raise rates. The dollar hit an 11-1/2-year high against the euro, which has been under pressure since the European Central Bank announced a bond-buying program to lower euro zone borrowing costs.
Last month’s decline in the unemployment rate, however, largely reflected people dropping out of the labor force.
But economists, who had expected payrolls to rise only 240,000 and the unemployment rate to fall to 5.6 percent, noted that other indicators monitored by the U.S. central bank showed a rapidly tightening labor market.
February marked the 12th straight month that employment gains have been above 200,000, the longest such run since 1994.
Average hourly earnings rose by three cents last month, leaving the year-on-year gain at 2 percent. That compared to a 2.2 percent rise seen in the 12 months through January.
While economists acknowledged that persistently sluggish wage growth and very benign inflation argued against the Fed pulling the trigger in June, they said tightening conditions in the labor market could force the central bank’s hand.