Job Growth Continues, But Wages Lag

    Job Growth Continues, But Wages Lag

    Home Buying

    March 14 2022

    Economic Observer
    Strong Labor Market Continues

    Overview: Over the past week, investors continued to react to shifting expectations for a resolution to the conflict in Ukraine. Daily price movements were quite large, but mostly offsetting, and mortgage rates ended the week just a little higher. Divider
    In response to geopolitical events such as the conflict in Ukraine, investors generally seek to reduce the level of risk in their portfolios. Since the start of the hostilities, news that has raised tensions has caused investors to shift from stocks to relatively safer assets such as bonds. This extra demand for mortgage-backed securities (MBS) has been favorable for mortgage rates. News that has raised hope for a resolution has had the reverse effect.

    The closely watched monthly Employment Report revealed strong job gains but weaker than expected wage growth. The economy gained 678,000 jobs in February, well above the consensus forecast of 400,000, and revisions to the results for prior months added another 92,000. Particular strength was seen in the leisure and hospitality sectors. The economy has now recovered all but about 1 million of the jobs lost during the pandemic. The unemployment rate unexpectedly fell from 4% to 3.8%. Average hourly earnings were 5.1% higher than a year ago, down from an annual rate of 5.5% last month, and far below the consensus forecast of 5.8%. Since a high proportion of the job gains were in lower paying positions, average wages fell short of the expected levels.

    The latest Job Openings and Labor Turnover Survey (JOLTS) report provided further evidence that the labor market remains very tight. At the end of January, there were a massive 11.3 million job openings, over 4 million more than in January 2020 prior to the pandemic. In addition, the results from December were revised higher to a record 11.4 million job openings. A high level of job openings reflects a strong labor market, as companies struggle to hire enough workers with the necessary skills. A very large number of employees also willingly left their jobs in January. This is viewed as a sign of labor market strength as well, since people usually quit only if they expect that they can find better jobs.

    Unemployment Rate (%)


    Week Ahead
    Mar. 10
    European Central Bank meeting
    Consumer Price Index (CPI)
    Mar. 16
    Retail Sales report
    U.S. Federal Reserve meeting (25 basis-point rate hike expected)
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