The U.S. unemployment rate climbed to a two-year high in February and hiring remains healthy, indicating that the labor market has cooled but remains resilient.

On Friday, March 8, the U.S. Bureau of Labor Statistics released data showing that the U.S. non-farm payrolls increased by 275,000 in February, once again higher than the expected 200,000 and higher than the average monthly increase of 230,000 over the past 12 months. .

A government survey of businesses showed that job growth in February was concentrated in services, including health care, leisure and hospitality, and government.

The number of new non-farm jobs in December was revised down from 333,000 to 290,000; the number of jobs in January was sharply revised down to 229,000 from the previous 353,000. After these revisions, the number of non-farm employment in the first two months The number of people was revised downward by 167,000.

The U.S. non-farm unemployment rate unexpectedly rose to 3.9% in February, higher than market expectations of 3.7%. The value in January was 3.7%.

The average hourly wage growth rate in the United States in February reached 4.3% year-on-year, in line with expectations of 4.3%. The wage growth rate in January was revised down from 4.5% to 4.4%, and the month-on-month growth rate dropped to 0.1%, which was lower than the expected 0.2%. The value was revised down from 0.6% to 0.5%.

The average weekly working hours of non-farm employees rose by 0.2 hours to 34.3 hours in February.

The labor force participation rate remained at 62.5% in February.

It is worth mentioning that the payroll and wage data come from a survey of businesses and other employers, while the unemployment data comes from a smaller survey of households.

Market Reaction

After the release of the non-farm payrolls report, traders still believe that the Federal Reserve will begin to cut interest rates in June. The probability of starting to cut interest rates in May is about 30%. They also expect the Federal Reserve to make additional interest rate cuts in 2024.

After the data was released, the U.S. dollar index fell about 20 points in the short term to 102.47. The U.S. 10-year Treasury bond yield rose by about 6 basis points in the short term and then fell by about 7 basis points to 4.117%. U.S. stock futures rose in the short term, and Nasdaq 100 index futures turned higher. Spot gold rose by more than $10 in the short term to $2,180.81 per ounce, continuing to hit a record high.

Analysis and Comments

While consumers are being squeezed by borrowing costs and rising prices, job gains and modest wage growth continue to provide them with the wherewithal to spend. The labor force participation rate has gradually and unevenly rebounded, which has alleviated the tight situation in the job market to a large extent.

Federal Reserve Chairman Jerome Powell said in testimony to Congress on Wednesday that the labor market remains tight and wages are rising. The Fed is trying to use our policies to sustain growth and keep the labor market strong while also making further progress on inflation.

U.S. Treasury Secretary Yellen said the February non-farm payrolls report suggested the job market remains strong. The increase in labor supply drives U.S. economic growth. Housing remains a “huge concern” for the Biden administration.

Julie Su, Acting Secretary of the U.S. Department of Labor, said that the non-farm payrolls data indicate that the job market continues to grow strongly and steadily. The U.S. manufacturing industry has just "taken off" and still needs to put in a lot of effort.

Nick Timiraos, a well-known financial journalist known as the "New Federal Reserve News Service", said that since September 2022, the proportion of permanently unemployed people in the labor force has been rising and exceeded 1% for the first time in two years.

Analyst Anna Wong commented on the U.S. non-farm payroll data in February:

Following January’s blowout non-farm payrolls data, February’s non-farm payrolls data should also be strong. However, the hiring advantage is likely to be concentrated in a few industries that are either affected by warmer-than-usual weather during the month or are less sensitive to cyclical conditions.

Meanwhile, most other labor market indicators, including household surveys, point to a much less tight labor market. We believe this is the more accurate picture, and we expect NFP data in the coming months to increasingly reflect this.

Analyst Ira Jersey commented on the U.S. non-farm payroll data in February:

Rate markets are likely to focus on rising unemployment and downward revisions to the previous reading. While the labor market is far from weak, there are signs of cracks emerging that could solidify expectations for a mid-year rate cut from the Federal Reserve.