February Jobs - Unexpectedly Weak

Payrolls down, unemployment up.  In February, U.S. payrolls unexpectedly fell while unemployment ticked higher raising doubts about the health of the labor market after a surprisingly strong print in January.  Employers cut 92K jobs compared to expectations for 55K in gains and the unemployment rate rose to 4.4% from 4.3% a month earlier.  Today’s report calls into question whether the labor market is actually stabilizing after one of the worst years for hiring (outside of a recession) in decades.  While job growth jumped in January and weekly jobless claims seem to have settled in at a low level, companies may be starting to reduce staff amid early AI-driven productivity gains.  While Fed policymakers have been more focused on inflation, even before the U.S.-Israeli war on Iran, ongoing evidence of a slowing labor market could refocus the Fed’s attention as it assesses how long to hold interest rates steady.

• Payrolls fall 92K in February.  The U.S. labor market shed 92k jobs in February after adding 126K jobs in January.  Expectations ranged from +113K to -9K with a median of +55K.  Health care employment declined by 28K in February with strike-related job losses of 37K.  Federal government employment declined by 10K.  Since reaching a peak in October 2024, federal government employment is down 330K or 11.0%.
• 4.4% unemployment – up 0.1% month-over-month.  The U.S. unemployment rate registered 4.4% in February, up from 4.3%% in January and higher than expectations for the same.  At 62.0%, the labor force participation rate fell from 62.5% a month earlier primarily reflecting adjustments to population estimates.