Employment Research Brief

Rising unemployment releases pressure on inflation. Employment growth accelerated in February with 275,000 jobs created, yet the unemployment rate also rose by 20 basis points to 3.9 percent. While the highest rate of unemployment in 25 months may be interpreted as a negative signal, in this case some labor market softening could be a positive sign, especially when paired with healthy employment growth. After more than two years of sub-4 percent unemployment, the additional 150,000 people joining the labor pool last month should help ease staffing bottlenecks, and signal positive hiring momentum in the coming months. A looser labor market will also help reduce the upward pressure on inflation from personnel shortages. Core PCE inflation slowed to 2.8 percent year over year in January, below the rise in average hourly earnings, implying an increase in real incomes.