Economy added 678,000 jobs in February as omicron faded, dining, travel picked up, unemployment fell to 3.8% – USA TODAY

Employers added a roaring 678,000 jobs in February as COVID-19’s omicron variant faded, spurring idled employees to return to work and reviving dining, travel and other activities.

The unemployment rate fell from 4% to 3.8%, the Labor Department said Friday.

Economists surveyed by Bloomberg had estimated that 400,000 jobs were added last month.

The 678,000 gains mark the strongest showing since July. So far, the nation has recovered 19.9 million, or 90%, of the 22 million jobs lost early in the pandemic, leaving it 2.1 million jobs shy of its pre-crisis level, a gap that could be closed by summer.

The drop in unemployment came even as the number of people working or looking for jobs grew by 304,000, pushing the labor force participation rate to from 62.2% to 62.3%, highest since March 2020. That means more people caring for children and others on the sidelines are returning to a favorable labor market with rising wages.

Also encouraging: Payroll additions for December and January were revised up by a total 92,000. January’s surprisingly robust advances, which came despite massive omicron-related worker absences, were even stronger than believed, at 481,000. 

“All signs are that the pandemic is easing its hold on the jobs economy,” says Jane Oates, president of WorkingNation, a nonprofit that raises awareness about the challenges facing U.S. workers and former head of Labor’s employment and training division. 

Yet Labor’s survey was conducted before Russia’s invasion of Ukraine drove up energy prices and rocked markets, developments that economists say could crimp business confidence and hiring in coming months.

In February, leisure and hospitality, which includes restaurants and bars, led the broad-based job gains with 179,000 as dining and travel bounced back. Professional and business services added 95,000; health care, 64,000; construction, 60,000; transportation and warehousing, 48,000; retail, 37,000; and manufacturing, 36,000.

About 760,000 people missed work in January because of COVID, Goldman Sachs estimates. Many salaried workers out sick are still counted as employed because they receive paid sick leave benefits but sidelined hourly staffers generally aren’t tallied. All told, Goldman estimates that about 200,000 people returned to job sites and payrolls last month.

Meanwhile, COVID cases have fallen more than 90% since peaking in mid-January as omicron eased, according to Oxford Economics. That has led to a pickup in dining, travel and hotel occupancy, along with beefed-up hiring in those sectors, says Diane Swonk, chief economist of Grant Thornton.

The number of businesses open, employees working and hours worked all increased sharply in February, according to Homebase, which supplies payroll software to small businesses.

The nation is still grappling with severe labor shortages that have crimped hiring despite record job openings. But the rising share of Americans working or looking for jobs indicate the crunch be easing somewhat.

That might reflect delayed affects from school reopenings and the expiration of enhanced jobless benefits in September, says Ian Shepherdson, chief economist of Pantheon Macroeconomics. The developments likely resolved child care problems for some parents and prodded some unemployed people to look harder for new jobs, he says.

The larger supply of workers appears to be moderating wage growth, says economist Michael Pearce of Capital Economics. Average hourly earnings were virtually flat last month, lowering the annual increase to a still hefty 5.1% from 5.7% in January.

The blockbuster job gains almost certainly cement the Federal Reserve’s decision to raise interest rates this month for the first time in more than three years, Pearce says. Fed Chair Jerome Powell told Congress this week a quarter point increase in the central bank’s near-zero short-term rate is likely as the central bank moves to curtail inflation that has hit a 40-year high of 7.5%.

But the slightly tempered pay increases reduce the need for more aggressive moves in coming months, Pearce says, such as a half point hike at some meetings.