| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Nonfarm Payrolls - M/M | 160,000 | 130,000 to 300,000 | 151,000 | 143,000 | 125,000 |
| Unemployment Rate | 4.0% | 3.9% to 4.1% | 4.1% | 4.0% | |
| Private Payrolls - M/M | 143,000 | 108,000 to 190,000 | 140,000 | 111,000 | |
| Manufacturing Payrolls - M/M | 5,000 | 5,000 to 6,000 | 10,000 | 3,000 | -5,000 |
| Participation Rate | 62.4% | 62.6% | |||
| Average Hourly Earnings - M/M | 0.3% | 0.2% to 0.4% | 0.3% | 0.5% | 0.4% |
| Average Hourly Earnings - Y/Y | 4.0% | 4.1% | 3.9% | ||
| Average Workweek | 34.2hrs | 34.2hrs to 34.2hrs | 34.1hrs | 34.1hrs |
Highlights
Nonfarm payrolls are up 151,000 in February, not materially different from the consensus of up 160,000 in the Econoday survey of forecasters. There is a minimal net revision of down 2,000 to the prior two months. The unemployment rate is a tenth higher at 4.1 percent in February, just above the consensus forecast of 4.0 percent. Average hourly earnings are up 0.3 percent in February from January and up 4.0 percent year-over-year. On the face of it, the February employment report looks like another in a line of solid reports. However, some of the details point to softer conditions in the labor market.
The monthly average for the payrolls rise is 138,000 for the January-February period, below the quarter average of 289,000 in the fourth quarter 2024 and 157,000 in the third quarter 2024.
Private payrolls are up 140,000 in February. However, this is mainly due to a 73,000 increase in private education and health services. Job gains elsewhere were generally much smaller. There is evidence of cutbacks in areas associated with consumer spending like a16,000 decline in leisure and hospitality, or 6,300 in retail trade. Government jobs are up 11,000, but that is only at the state and local level. Federal government jobs are down 10,000.
The slight rise in the unemployment rate is not alarming in itself, but it is the result of a 385,000 drop in the labor force to 170.359 million in February with the number of employed down 588,000 to 163.307 and unemployed up 203,000 to 7.052 million. The U-6 unemployment rate the broadest measure of unemployment jumps five-tenths to 8.0 percent in February, its highest since 8.2 percent in October 2021. Layoffs and/or stalled hiring is leading to more workers considering themselves as unemployed, among them discouraged workers who are experiencing longer separations from the labor market and/or problems finding new jobs in their field. The labor force participation rate is down two-tenths to 62.4 percent in February.
One indicator of some distress in the labor market is the rise of people working part-time for economic reasons which rose 460,000 to 4.937 million in February. Workers will take part-time employment when they can't find full-time jobs, or take on a second job to improve household finances when prices are up or debt is pressing.
The FOMC will be care not to overreact to a single set of data points, but combined with other evidence, will probably conclude that the labor market and US economy has not yet weakened sufficiently to tip the balance to a need for rate cuts, but it will be more central to the discussions of the risks to the outlook at the upcoming March 18-19 meeting.
The monthly average for the payrolls rise is 138,000 for the January-February period, below the quarter average of 289,000 in the fourth quarter 2024 and 157,000 in the third quarter 2024.
Private payrolls are up 140,000 in February. However, this is mainly due to a 73,000 increase in private education and health services. Job gains elsewhere were generally much smaller. There is evidence of cutbacks in areas associated with consumer spending like a16,000 decline in leisure and hospitality, or 6,300 in retail trade. Government jobs are up 11,000, but that is only at the state and local level. Federal government jobs are down 10,000.
The slight rise in the unemployment rate is not alarming in itself, but it is the result of a 385,000 drop in the labor force to 170.359 million in February with the number of employed down 588,000 to 163.307 and unemployed up 203,000 to 7.052 million. The U-6 unemployment rate the broadest measure of unemployment jumps five-tenths to 8.0 percent in February, its highest since 8.2 percent in October 2021. Layoffs and/or stalled hiring is leading to more workers considering themselves as unemployed, among them discouraged workers who are experiencing longer separations from the labor market and/or problems finding new jobs in their field. The labor force participation rate is down two-tenths to 62.4 percent in February.
One indicator of some distress in the labor market is the rise of people working part-time for economic reasons which rose 460,000 to 4.937 million in February. Workers will take part-time employment when they can't find full-time jobs, or take on a second job to improve household finances when prices are up or debt is pressing.
The FOMC will be care not to overreact to a single set of data points, but combined with other evidence, will probably conclude that the labor market and US economy has not yet weakened sufficiently to tip the balance to a need for rate cuts, but it will be more central to the discussions of the risks to the outlook at the upcoming March 18-19 meeting.
Market Consensus Before Announcement
The consensus looks for a moderate 160,000 rise in payrolls and no change in unemployment. Presumably, March will be when the employment picture reflects federal government layoffs and related effects.
Definition
The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Description
If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions can be dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
