(Bloomberg) — Employers added more jobs than forecast in February and the unemployment rate dropped to 5.5 percent, the lowest in almost seven years, showing the labor market is sustaining progress after the best performance since 1999.
The 295,000 advance in payrolls last month followed a 239,000 January increase that was smaller than previously reported, figures from the Labor Department showed Friday in Washington. The median forecast in a Bloomberg survey of economists called for a 235,000 increase. The unemployment rate fell from 5.7 percent, while hourly earnings rose less than forecast.
The report underscores a lingering appetite among companies to boost headcounts as increased purchasing power from cheaper fuel supports consumer spending. A missing link continues to be faster wage growth that will be needed to ensure household purchases accelerate.
“There is solid momentum in the U.S. labor market,” Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “We feel comfortable that we are going to see a pickup in wage growth as firms have to attract and retain workers, given an improving economic backdrop.”
Estimates in the Bloomberg survey ranged from 150,000 to 370,000. The jobless rate was projected to drop to 5.6 percent from January’s 5.7 percent.
Average hourly earnings rose 0.1 percent from the prior month after rising 0.5 percent in January, which was the most since November 2008. The median forecast called for a 0.2 percent gain. Earnings were up 2 percent over the past year, also less than projected and matching the increase on average since the expansion began in mid-2009.
February marked the 12th straight month payrolls have increased by at least 200,000, the best run since a 19-month stretch that ended in March 1995. Payrolls rose 3.1 million in 2014, the most in 15 years.
The revision to the January figures subtracted 18,000 jobs from the payroll count. December was unrevised at 329,000. To calculate the data, the Labor Department surveys businesses and households for the pay period that includes the 12th of the month.
The gain in February employment was led by stronger hiring in business services and leisure and hospitality, which include restaurants.
The drop in the jobless rate reflected both an increase in hiring and a decline in the number of people in the labor force. The participation rate, which indicates the share of working-age people working or looking for a job, decreased to 62.8 percent from 62.9 percent in January.
Federal Reserve policy makers are closely monitoring worker pay as they consider a timetable for their first increase in borrowing costs since 2006.
“There are perhaps hints, but we have not yet seen any significant pickup in wage growth,” Fed Chair Janet Yellen said in Feb. 24 testimony before the Senate Banking Committee.
Some companies already are finding that a tighter labor market is increasing pressure to pay more to attract and hold employees. Wal-Mart Stores Inc., the world’s largest retailer, announced last month that it planned to begin paying all of its U.S. hourly workers at least $9 an hour by April and $10 an hour by next February, resulting in raises for about 500,000 workers in the first half of this fiscal year.
Overall, inflation also has remained subdued, with a plunge in energy costs, combined with sluggish global growth, weighing on prices. The personal consumption expenditures price gauge, the Fed’s preferred measure, has missed the central bankers’ 2 percent goal for 33 straight months through January.