US Jobs Report Misses Badly
The U.S. economy posted a surprise contraction in February, with 92,000 jobs lost and the unemployment rate rising. The unexpected weakness is unsettling markets and prompting a swift reappraisal of the Federal Reserve's potential rate cut timeline.
The miss on expectations was substantial, with economists forecasting a gain of roughly 60,000 jobs, not a loss of 92,000. Adding to the bleak picture, prior reports were revised down significantly; December's job numbers were adjusted from a 48,000 gain to a 17,000 loss, meaning 69,000 fewer jobs were created in the last two months than previously thought. The weakness was widespread, hitting sectors that had been consistent job-growth engines. Healthcare, which had been adding an average of 36,000 jobs per month, shed 28,000 positions. This was heavily influenced by a Kaiser Permanente strike that sidelined over 30,000 workers during the survey period. Other key sectors also faltered. Manufacturing lost 12,000 jobs, construction dropped by 11,000, and leisure and hospitality fell by 27,000. The information and federal government sectors continued their downward trends, losing 11,000 and 10,000 jobs, respectively. The downturn disproportionately affected specific demographics. The unemployment rate for Black workers increased to 7.7%, the highest among all racial groups. Young workers also saw their unemployment rate climb to 9.7%. Despite the headline job loss, average hourly earnings provided a counter-signal, rising 0.4% for the month and 3.8% over the past year, keeping wage growth slightly ahead of inflation. However, the labor force participation rate fell to 62%, its lowest level since December 2021. The dismal report has put the Federal Reserve "between a rock and a hard place." While markets still expect the central bank to hold rates steady at its upcoming March 17-18 meeting, the odds of a rate cut later in the year have now increased.
