Prime Highlights:
U.S. nonfarm payrolls rose by 151,000 in February, below the expected 170,000, but better than the revised 125,000 in January.
The unemployment rate edged up to 4.1%, with the labor force participation rate falling to 62.4%.
Key Background:
In February, the U.S. economy saw a seasonally adjusted increase of 151,000 nonfarm payrolls, marking a positive yet weaker-than-expected growth. Although an improvement from the downwardly revised 125,000 reported for January, the figure fell short of the 170,000 forecasts by economists. The unemployment rate edged up slightly to 4.1%, reflecting a stable but not robust labor market.
The report also highlighted a decline of 10,000 in federal government employment, which was influenced by ongoing efforts by the Department of Government Efficiency (DOGE), led by Elon Musk. While the federal workforce reduction measures may not have been fully reflected in February’s numbers, their impact is expected to be more pronounced in future months. Overall, government payrolls increased by 11,000, despite the federal decline.
Sector-wise, health care was the largest contributor to job creation, adding 52,000 positions, aligning with its 12-month average. Other sectors experiencing growth included financial activities (21,000), transportation and warehousing (18,000), and social assistance (11,000). However, retail employment saw a slight decline of 6,000 jobs. Wage growth remained moderate, with average hourly earnings increasing by 0.3%, resulting in a 4% annual gain. This was slightly below the anticipated 4.2% increase, suggesting that wage growth may be cooling.
Despite the mixed report, market reactions were relatively positive, with stock futures moving higher and Treasury yields falling. However, experts, including Byron Anderson of Laffer Tengler Investments, remain cautious, expressing concerns about the broader economic impact of ongoing political turmoil. The labor force participation rate dropped to 62.4%, its lowest level since January 2023, as the labor force shrank by 385,000. Moreover, a broader measure of unemployment, which includes discouraged workers, rose to 8%, indicating potential challenges ahead. These mixed indicators highlight the uncertain trajectory of the U.S. labor market amidst ongoing political and economic volatility.
