Nonfarm payrolls came in at -92K in February, a massive miss against the +55K consensus. To add insult to injury, the prior two months were revised down by a combined 69K. The three-month average pace of job growth is now running at a paltry 6K.
The unemployment rate ticked up to 4.4% from 4.3%. Not a disaster on its own, but the direction of travel here is not your friend if you’re in the soft-landing camp and it came with a drop in labor force participation to 62.0% from 62.5%.
The losses were broad-based. Services shed 61K, goods-producers dropped 25K. Leisure and hospitality got hit for 27K, healthcare lost 19K (healthcare strikes played a role there), and manufacturing gave back 12K. Retail was basically the only sector that managed to tread water. Construction and manufacturing are clearly feeling the weight of trade uncertainty — year-over-year manufacturing employment is now running at -0.8%.
The one bright spot? Wages. Average hourly earnings came in at 0.4% month-over-month, a tick above expectations. That’s the kind of number that gives the Fed a headache — weakening labor demand but sticky pay growth isn’t exactly a clean setup for rate cuts. The market is pricing in 50 bps in easing through year end, up about 10 bps on Friday but complicated by the enormous rally in oil prices last week.
CIBC’s Katherine Judge is sticking with the call for Fed cuts in June and July, but flags the oil price shock as a potential wrench in the gears. If the war drags on, that timeline could slip.
The initial market reaction was predictable — yields and the dollar dropped — but that reversed as traders started worrying more about what persistent oil prices mean for the inflation outlook than what the weak payrolls mean for growth.
Bottom line: This was a bad report. Strip out healthcare and government volatility and private payrolls are averaging -9K over the past three months. That’s recessionary-adjacent territory and the Fed knows it. But with oil doing what it’s doing, their hands might be tied for a bit longer than the market would like.
This article was written by Adam Button at investinglive.com.
