The February jobs report is out and it’s a huge beat.

In February, nonfarm payrolls grew by 313,000 and the unemployment rate held steady at 4.1%, according to the Bureau of Labor Statistics. Over the last three months, job gains have now averaged 242,000 per month. February’s payrolls gain was the largest since July 2016.

February marks the fifth-straight month the unemployment rate has been at 4.1%, which is the lowest level since December 2000. Economists had expected the report to show nonfarm payrolls grew by 205,000 during the second month of the year with the unemployment rate falling to 4%.

The February jobs report beat expectations, boosting markets and confirming that the U.S. economy remains strong. (Photo by Ronald Martinez/Getty Images) More

Wage growth was a disappointment, however, with wages rising 0.1% over the prior month and 2.6% over last year. Both numbers were well below expectations. Economists had expected the report to show that average hourly earnings grew by 0.2% over the prior month and 2.8% over the prior year in February, according to estimates from Bloomberg.

Wage figures were the biggest focus for investors ahead of this report as an acceleration in wage gains is seen as portending an increase in inflation, which could prompt the Federal Reserve to raise rates more aggressively than markets expect.

Following the the report, stock futures were higher with Dow futures up 150 points, or 0.6%, while S&P 500 futures were up 0.5% and Nasdaq futures were higher by 0.6%.

And so while wages were a disappointment, a bright spot in this report was the labor force participation rate, which climbed to 63% from 62.7%, the largest increase in this figure in years.

Labor force participation has been on the decline for years in the U.S. labor market, and February’s increase shows there is still slack remaining in the labor market to draw in workers who were left behind after the financial crisis.

Jed Kolko, chief economist at Indeed, noted Friday that the employment-to-population ratio for prime age workers — or those aged 25-54 — hit 79.3% in February, the highest since the middle of 2008.

And so while January’s jobs report perhaps stoked fears in the market that a tight labor market would lead to an unwanted acceleration in inflation, the February report suggests there is still a pool of workers to be pulled into the workforce.

Neil Dutta, an economist at Renaissance Macro, said Friday that, “The February employment report was an absolute knock out with strong growth in payroll employment and a sharp increase in labor force participation.

Dutta added that, “The pick-up in the labor force implies little need at this juncture for the Fed to speed up the pace of its rate tightening campaign. There is still room to run in this labor market recovery. The unemployment rate has been flat for the last five months. That is a good thing right now.”

By industry, construction was a standout as 61,000 jobs were created in the sector in February, the most since 2007. Manufacturing payrolls were also a bright spot, as 31,000 jobs were added to the sector in February.

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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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