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US: Employment Situation
| Consensus | Consensus Range | Actual | Previous | Revised | |
| Nonfarm Payrolls - M/M | 60,000 | 35,000 to 125,000 | -92,000 | 130,000 | 126,000 |
| Unemployment Rate | 4.4% | 4.3% to 4.4% | 4.4% | 4.3% | |
| Private Payrolls - M/M | 65,000 | 49,000 to 80,000 | -86,000 | 172,000 | 146,000 |
| Manufacturing Payrolls - M/M | -12,000 | 5,000 | 5,000 | ||
| Participation Rate | 62.0% | 62.5% | |||
| Average Hourly Earnings - M/M | 0.3% | 0.3% to 0.3% | 0.4% | 0.4% | |
| Average Hourly Earnings - Y/Y | 3.7% | 3.6% to 3.8% | 3.8% | 3.7% | |
| Average Workweek | 34.3hrs | 34.2hrs to 34.3hrs | 34.3hrs | 34.3hrs |
Highlights
Nonfarm payrolls confounded market expectations with a sharp decline in February. Some of the weakness can be attributed to special factors such as the nurses strike in New York which affected the otherwise robust healthcare sector. However, this was not the entire cause. The unemployment rate was a bit higher but not enough to suggest that the current trend for low layoff activity is changing. Fed policymakers will not overreact to this one month of data, but it does suggest that the underlying conditions are for ongoing weak hiring in a time of uncertainty.
Nonfarm payrolls are down 92,000 in February after a net downward revision of 69,000 to the prior two months. The February decline is well below the consensus of up 60,000 in the Econoday survey of forecasters. The monthly average for the first quarter to-date is a meager up 17,000 compared to down 39,000 in the fourth quarter 2025 and up 23,000 in the third quarter 2025. Hiring continues soft overall.
Payrolls at goods-producers is down 25,000 in February with construction down 11,000, manufacturing down 12,000 and mining down 2,000. Private service-providers' payrolls are down 61,000 in February. Over half of that is down 34,000 in private education and health services. The strike of about 42,000 nurses in New York state is probably behind the decrease of 34,000 in ambulatory health care services. These jobs will be recovered in March now that the strike is over. Leisure and hospitality is down 27,000 in February as restaurants cut 29,700 from payrolls.
Average hourly earnings are up 0.4 percent in February from January, the same as the up 0.4 percent in January from December. The year-over-year increase is 3.8 percent in February, up a bit from 3.7 percent in January.
The unemployment rate is little changed at 4.4 percent in February from 4.3 percent in January. The reflects an essentially unchanged size in the labor force which is up only 18,000 to 1.705 million in February. The number of employees is down 185,000 and the number of unemployed is up 203,000. The participation rate is down to 62.0 percent, its lowest since 62.0 percent in December 2021.
The number of people employed part-time for economic reasons is down 477,000 to 4.396 million in February. This could be people withdrawing from part-time work and/or part-timers finding full-time employment. The decrease in the U-6 unemployment rate the broadest measure of unemployment to 7.9 percent in February from 8.1 percent in January points to the former as more workers on the margins withdraw from the labor force. The number of job losers is up 125,000 to 3.620 million while job leavers are down 171,000 to 867,000. There are few new entrants to the labor market in February at up 9,000 to 805,000.
Market Consensus Before Announcement
Jobs expected up 60K, a moderate showing these days, with the jobless rate up a tick at 4.4 percent versus 4.3 percent in January.
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.
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.
