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February job growth has some positive signs for the Fed

ARI SHAPIRO, HOST:

The U.S. job market is still hot, but not quite as scalding as it was a month ago. Employers added 311,000 jobs in February, according to the latest numbers out from the Labor Department this morning. That's a big number, but well below the half-million jobs added the month before. The Federal Reserve is keeping a close eye on the job market as officials weigh how aggressive they need to be fighting inflation. On top of that, the Fed faces another decision about raising interest rates in less than two weeks. NPR's Scott Horsley is covering this. And, Scott, job growth slowed somewhat in February, but it's still pretty strong. So where are these new jobs coming from?

SCOTT HORSLEY, BYLINE: Most of the new jobs are in the services sector, especially the kind of thing you do face-to-face with other people, whether that's going out to eat or getting on an airplane. Bars and restaurants added 70,000 jobs last month. Hotels added another 14,000. Vinay Patel owns a dozen hotels. He's starting to see more of his rooms filling up even in the middle of the week.

VINAY PATEL: I think people are slowly getting back in the groove of things. I think the leisure component had already been back. And then now we're slowly seeing this year some of that corporate travel come back as well. And so obviously that requires us to hire more people with the housekeeping, front desk, pretty much all across the board.

HORSLEY: Now, there are some weaker spots in this jobs report. Trucking companies cut more than 8,000 jobs last month. Factories cut about 4,000. That suggests we're not buying as much stuff as we used to. But construction jobs have held up surprisingly well. The economy added 24,000 construction jobs last month, even though rising mortgage rates have really put the brakes on the housing market.

SHAPIRO: Despite the creation of new jobs, the unemployment rate also inched up in February. What should we make of that?

HORSLEY: Probably not too much. Remember; January's jobless rate was the lowest in more than half a century, just 3.4%. Unemployment did tick up a little bit last month to 3.6%, but that's mostly because there were a lot more people out looking for work. More than 400,000 people joined or rejoined the workforce last month. The share of adults who are in the labor force is now the highest it's been since the start of the pandemic. President Biden thinks that's an encouraging sign that people are feeling good about their job prospects.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT JOE BIDEN: People who were staying out of the job market - this is particularly good news - are now getting back into the job market. They're coming off the sidelines. They're getting back into the job market.

HORSLEY: And, of course, some people may be joining the workforce not because they're excited about going to work, but because they've got bills to pay and because the cost of rent and groceries keeps going up.

SHAPIRO: And the Fed is trying to get those costs under control by raising interest rates. How's that going?

HORSLEY: Inflation has come down, but not as quickly as the Fed would like. Fed Chairman Jerome Powell warned this week that the central bank might have to raise interest rates higher and more quickly in order to get prices under control. Among other things, the Fed has been worried that an overheated job market might put more upward pressure on inflation, and those fears were stoked by that very hot jobs report a month ago. As you've noted, today's report was a little bit cooler. Not only was the headline jobs number lower, but you do have more people coming into the workforce, which could help take some pressure off. And wage growth has slowed to the point where it's not as much of a concern right now. The betting markets think the Federal Reserve will likely go with a smaller quarter percentage point interest rate hike at its next meeting in just under two weeks, rather than a more aggressive half-point rate increase. But there's still one more key piece of information to come before that Fed meeting, and that's the February inflation rate due out next week.

SHAPIRO: NPR's Scott Horsley. Thank you.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.