The Bureau of Labor Statistics on Friday reported the United States economy added 275,000 jobs in February—far exceeding expectations. Unemployment increased to 3.9% from 3.7%.
February was the second-straight month showing better-than-expected growth in the U.S. economy in the jobs report. (January’s number was revised downward by more than 100,000 jobs.) This month, job gains happened across all sectors of the economy—from healthcare to government to transportation and warehousing.
Looking back, the job gains for the first two months of 2024 are about 35% lower than the first two months of 2023. That, paired with slower wage growth and a slight increase in the unemployment rate, are all positive signs for overall inflation continuing to cool, says Lawrence Dearth, Insight Global’s President of Recruiting.
“The jobs report can send some mixed signals at times, but what’s important to see is how we’re doing year over year and how things are trending,” Dearth said.
“It’s a good sign that the things the economy needs to slow down (wage growth) are slowing down, and things that you want to see pick up or maintain speed (job gains) are moving.”
Some other important economic data released over the last week include:
- Job openings decreased slightly from December to January but remained high at 8.9 million.
- Hire rates, separation rates, and layoff rates are all about the same from December to January—and they were all around pre-pandemic rates.
- Hours worked (0.1 increase) and hourly earnings (5 cents) both rose slightly, but both were lower than expectations.
- The long-term unemployment rate (people unemployed 27 weeks or longer) dropped to 18.7%
- The private sector added 140,000, according to ADP. The payroll company reported that wage gains in the private sector continue to ease—especially for people who aren’t changing jobs—but are still outpacing inflation.
- Year-over-year inflation in January was 3.1%, a number far lower than the high in June 2022, but not quite in the 2% range the Federal Reserve is targeting. The next inflation number releases on March 12.
“This is the balance that companies are hoping to see,” Dearth said. “More job seekers, more jobs being added, and a more sustainable unemployment rate that makes hiring achievable.”
IT Wages in 2024
Wage growth in February was just 0.1% after ballooning 0.6% in January, and wages are a key indicator for the Federal Reserve’s interest rate decisions. They affect inflation, and thus affect how The Fed decides to raise, cut, or keep interest rates the same.
The information technology (IT) field saw massive wage growth over the past couple of years, but Dearth predicts that IT wage bubble to pop in 2024.
There are several factors that go into this forecast:
- Abnormal demand for tech workers during the COVID-19 pandemic is normalizing.
- High interest rates can affect IT capital investment.
- IT unemployment has hovered at or above the national average for the last six months.
- Remote work rates are normalizing from pandemic peaks, and the return of globalization has opened the labor force to more reliable and cost-effective options.
- Return-to-office policies could force remote workers
Insight Global has already seen a slight decrease in wages for IT workers in 2023, and we expect that trend to continue across businesses of all sizes in 2024.
Dearth also says Insight Global is “seeing early signs of our IT enterprise customer base starting to ramp up hiring again—and taking advantage of ready and available labor we have access to.” That could be an indication that companies hiring for IT roles are more comfortable with the wages being paid for that talent.