The U.S. economy added 151k jobs in February, only a touch below the consensus forecast of 160k. Payroll figures for December 2024 were revised higher by 16k (to 323k), while January was revised lower by 18k (to 125k), resulting in a total net revision of -2k over the two prior months.
Private payrolls rose 140k – up from January’s 81k – with the largest gains seen in private health care & social assistance (+63k), financial services (+21k), construction (+19k) and transportation & warehousing (+18k). Leisure & hospitality (-16k) and retail trade (-6k) both lost jobs on the month. Meanwhile, the public sector added a more modest 11k jobs in February – down from the 38k averaged over the prior twelve-months – but the gain was entirely due to a further uptick in state & local hiring. Employment at the federal level was lower by 10k.
In the household survey, civilian employment (-588k) plunged by more than the labor force (-385k), pushing the unemployment rate up to a still low 4.1% (from 4.0% in January). The labor force participation rate dropped 0.2 percentage points to 62.4% or the lowest reading since January 2023.
Average hourly earnings (AHE) rose 0.3% month-on-month (m/m), a deceleration from January’s downwardly revised gain of 0.4% m/m (previously 0.5% m/m). On a twelve-month basis, AHE held steady at 4.0%, while the three-month annualized pace dipped to 3.6% – signaling a further easing in wage pressures in the months ahead. Aggregate weekly hours rose 0.1% m/m, after having declined in each of the two prior months.
Key Implications
Payroll growth turned modestly higher in February, following a softer reading in January, which was likely hindered by inclement weather and the California wildfires. Over the last three months, hiring activity has remained solid – averaging 200k jobs per-month. However, job growth is likely to soften over the coming months, as federal layoffs related to DOGE continue to mount and ongoing trade policy uncertainty helps to weigh on near-term hiring intentions.
Financial markets have become increasingly concerned about slowing growth prospects in recent weeks, with fed futures now fully pricing for three 25bps rate cuts by year-end. However, the Fed is unlikely to be swayed by the recent market volatility, particularly amid a still healthy labor market and potential policy changes that could further add to still elevated inflationary pressures. More evidence of cooling inflation or a sudden U-turn in the labor market are likely a prerequisite for the next rate cut, something which Fed Chair Powell is likely to emphasize in his speech this afternoon at 12:30 PM ET.
