Weekly Economic Trends and Indicators
The Headlines:
On Friday, the Bureau of Labor Statistics (BLS) reported that U.S. nonfarm payroll employment decreased by 92,000 in February. Revisions to previous months were also negative. December’s figure was revised downward from +48,000 to -17,000. January was revised from +130,000 to +126,000.
The U.S. unemployment rate was little changed from January at 4.4%. Most measures from the household survey were also little changed. One exception was discouraged workers (workers who exited the labor market because they believed no jobs were available for them) which decreased by 109,000. That contributed to the number of reentrants into the labor market, which increased by 152,000.
The Details:
Job losses were across the board with no category experiencing an increase of more than 10,000. Among the sectors with the largest decreases in jobs were leisure and hospitality (-27,000), health care and social assistance (-18,600), manufacturing (-12,000), transportation and warehousing (-11,300), construction (-11,000), and information (-11,000). Government, which had declined significantly for several months in 2025, was only down 6,000 jobs.
The Context:
This report was a surprise to the markets as expectations were for an increase of about 50,000 jobs. The decrease in health care and social assistance jobs was partly driven by striking workers in California and Hawaii during the survey week for this report. However, even with those 31,000 workers added back into the total, the overall number is still negative.
February’s job losses represented the 6th month of decline since the start of 2025. After the benchmark revisions released last month are factored in, job growth has alternated between positive and negative going back to last May with a net change of nearly zero.
The news comes at a particularly bad time for the Federal Reserve as they contemplate the future path of short-term interest rates this year. According to CME FedWatch, the probability of a rate cut at the next Fed meeting (March 18th) is only about 4%, and that was not affected by today’s job report. However, expectations surrounding the April 29th meeting have seen a larger movement. Prior to the U.S. military strikes against Iran, the probability of an April rate cut was about 23%. That fell to only 11% by March 5th on expectations of higher inflation resulting from rising oil prices. After the job report was released, the probability rose to 20%.
As we have seen from a number of historical episodes going back to the 1970s, some of the most difficult decisions for the Fed occur when the job market is slowing at the same time inflation is rising. If the increase in oil prices lasts through the spring, it could delay rate cuts that markets have been expecting for several months.
Next week: National Job Openings and Labor Turnover Survey
