While the February jobs report delivered another very strong payrolls number, the broader details of the report painted a confusing picture of the labor market. Although jobs growth was stronger than expected in February, there was a meaningful downward revision to the January jobs number, plus a jump in the unemployment rate. Monthly average hourly earnings growth was weaker than expected, but the annual figure remains elevated. Looking at the bigger picture, the combination of a strong jobs print with easing wage growth sits in “soft landing” territory and will be welcomed by the Federal Reserve. A June policy rate cut is still on the agenda.

Report details:

  • Total non-farm payrolls (measured by the establishment survey) increased by 275,000 in February, meaningfully higher than the consensus forecast for a 200,000 gain. Downward revisions to previous months muddied the picture somewhat, with January jobs revised down from 353,000 to a slightly less impressive 229,000. Despite the revisions, the monthly jobs numbers are very strong and are consistent with a robust labor market. The three- month moving average has been on a steady trend higher since the end of last year.
  • Hiring was generally broad-based, but mainly concentrated in noncyclical sectors such as education and healthcare, and government. Leisure and hospitality also recorded solid gains, but note that jobs in this sector are still below the pre-pandemic level, so continued catch- up is required.
  • The unemployment rate (measured by the household survey) rose from 3.7% to 3.9% in February, driven by 184,000 job losses. Unfortunately, the widening gap between the establishment and household surveys is making it increasingly difficult to decipher the underlying strength of the labor market. It is notable that the household survey, which has shown declines in employment for four of the past five months, is at odds with the broader labor market data and surveys, which continue to show strength.
  • Monthly average hourly earnings growth dropped from 0.5% to 0.1%. While this data point will be particularly welcome for the Federal Reserve and suggests that January’s spike was an anomaly, the annual rate only dipped slightly and remains elevated.


Today’s jobs report is somewhat market-positive. If the economy can continue to add jobs without triggering a resurgence in wage growth, the Fed will achieve its soft landing. However, the sheer magnitude of jobs growth suggests that the Fed cannot feel sufficiently confident that price pressures are contained, and therefore still needs to tread cautiously. Today’s report does not change our view that the first policy rate cut will come around mid-year—no earlier.

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