February Jobs - Unemployment Rises Despite Healthy Job Gains

Strong February job gains mask a gradually cooling labor market.  The unemployment rate climbed to a two-year high of 3.9% in February, but remains below 4% as hiring remained healthy.  The U.S. labor market added 275K jobs following a combined 167K downward revision to the prior two months.  The rise in the unemployment rate appeared to reflect more people entering the workforce and not immediately finding work.  This nuance, as well as a deceleration in wage growth point to a cooler, but still resilient labor market.  Fed projections provided in December indicated expectations for three rate cuts in 2024.  Investors are pricing in four, with the first cut anticipated in June.  Those expectations were largely unchanged following today’s report.

• 275K jobs added in February –  Above expectations; January revised sharply lower.  The U.S. labor market added 275K jobs in February, up from +229K (revised down from +353K originally reported) in January.  Forecasts ranged from +110K to +286K with a median of +200K.  Hiring was more pronounced in health care (+67K), leisure & hospitality (+58K), and government (+52K).
• 3.9% unemployment – up from 3.7%.  The U.S. unemployment rate rose 0.2% to 3.9% in February.  Forecasts ranged from 3.6% to 3.8% with a median of 3.7%.  This marks the 25^th consecutive month below 4% as unemployment has ranged from 3.5% to 4.0% since the end of 2021.  The labor force participation rate was unchanged at 62.5% for a third month in a row.  Year-over-year, wage growth increased 4.3% decelerating modestly from 4.5% in the month prior.  Month-over-month, wages increased 0.1% compared to +0.5% in January and below expectations of +0.2%.