The ​​US ​job ​market ​​continues to ​defy ​expectations​, ​with ​employers ​adding a ​robust ​275​,​000 ​new ​jobs in February​, ​according ​​to the ​latest ​employment ​report ​from ​​the Labor Department​. 

​This ​impressive ​job ​growth ​surpassed ​economists’ ​forecasts ​of ​200​,000 new ​jobs​, providing evidence ​of ​the ​economy’s resilience ​amid ​the ​Federal ​Reserve’s ​aggressive interest ​rate ​hikes​.

The ​report ​revealed ​that ​the job ​market ​is ​gradually ​cooling, ​which ​could ​help ​the ​Fed ​control ​inflation​.

Notably, the unemployment rate ticked to 3.9%, its highest level in two years, though still below levels considered sustainable in the long run.

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• US employers added 275,000 jobs in February, beating expectations.

• The unemployment rate rose to 3.9%, signaling the labor market cooling.

• Annual wage growth slowed to 4.3%, easing inflationary pressures.

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US Job Market Remains Resilient Despite Signs of Cooling

Wage Growth Moderates, Offering Inflation Relief

One of the most encouraging aspects of the report for the Fed was the continued moderation in wage growth. 

In February, annual wage gains slowed to 4.3%, down from 4.4% in January. 

Although ​the ​wage ​growth is ​still ​higher than ​the ​Fed’s ​2​% ​inflation target​, ​the ​central ​bank’s rate ​hikes ​positively ​impact the ​labor ​market​, ​which ​should ​help ​decrease inflationary ​pressures​​​.

Fed Weighs ‘No Rush’ for Rate Cuts

The recent job market data have led the Federal Reserve to continue taking a cautious approach to potential interest rate cuts. 

In​ ​his ​testimony before ​Congress ​this ​week, ​Fed Chair ​Jerome ​Powell ​emphasized ​that ​the ​economy ​remains ​strong, ​and ​policymakers ​are ​close to ​having ​enough ​confidence ​in ​the downward ​inflation ​trend ​to begin ​reducing ​rates​​. 

Analysts view the most recent employment report as consistent with the Fed’s assessment. 

Krishna Guha of Evercore ISI stated that the report “will reassure the Fed that economic conditions remain consistent with inflation moving towards 2%, and it will be appropriate to cut rates by June.”

Market Expectations Shift Towards Rate Cuts

Futures contracts now reflect an 80% chance that the Fed will start cutting interest rates by mid-June, with a one-in-four chance of a rate reduction as early as May 1. 

Traders have also priced in expectations for a percentage point of rate cuts by the end of the year, equivalent to four quarter-point reductions over the remaining seven Fed policy meetings in 2023.

Balancing Act for the Fed

While the job market remains strong, the Fed’s primary focus remains on achieving its 2% inflation target. 

With the latest inflation data still above that goal, policymakers will closely monitor incoming economic data for further assurance that inflation is on a sustained downward path before committing to rate cuts.

As Fed Governor Christopher Waller noted in February, there is “no rush” to cut rates, and he wants a couple more months of data to verify progress on inflation. 

The ​central ​​​bank’s ​deliberations will ​likely ​hinge ​on ​whether ​the ​labor ​market ​continues its ​gradual ​cooling ​trend​, ​easing ​wage ​pressures ​and ​lowering ​inflation​​.