February Non-Farm Payrolls, will it crash the US stock market?

Under multiple pressures such as declining consumer confidence and poor retail performance, Wall Street is facing a potential market correction risk.

This Friday, the U.S. Department of Labor is set to release the February non-farm payroll report, and this data may not be sufficient to alleviate investors' growing concerns about the U.S. economy and consumer health.

In the past two weeks, major U.S. stock indices have shown a downward trend. Although the U.S. stock market closed higher last Friday due to January PCE inflation data meeting expectations, market anxiety has spread, creating a tense atmosphere.

The market's concerns are not unfounded. A report released by the World Federation of Large Enterprises on February 25 showed that consumer confidence has declined, dropping to 98.3, significantly below the expected 102.5 and the previous value of 104.1, marking the largest monthly decline since August 2021 and the third consecutive month of decline; on February 21, Walmart lowered its earnings forecast for 2025, adjusting its operating profit growth to 3.5-5.5%, which is lower than last year's growth rate and significantly below Wall Street analysts' expectations.

These factors have deepened investors' concerns about the U.S. economic outlook. Brian Jacobsen, chief economist at Annex Wealth Management in Wisconsin, stated:

Investors are very nervous, so it doesn't take much of a trigger to cause a broad correction. If the employment data is slightly weak, concerns about disruptions from tariffs could exacerbate the mild weakness.

Market Expects Employment Data to Fall Short of Expectations

FactSet data shows that the February non-farm payroll report is expected to add 160,000 jobs, slightly higher than January's 143,000. The unemployment rate is expected to remain at 4%, while average hourly earnings are expected to drop from 0.5% to 0.3%. However, multiple analysts expect job growth may fall short of consensus expectations.

Jacobsen from Annex Wealth predicts non-farm employment will be close to 125,000 and expects March job growth may even fall below 100,000. Thomas Simons from investment bank Jefferies is even more pessimistic, predicting job gains of only 115,000 to 120,000.

The market's reaction to employment data may exhibit asymmetry: negative data is likely to exacerbate stock market corrections, while positive data may only provide a temporary boost to market sentiment. Ryan Jacobs, founder of Jacobs Investment Management in Florida, pointed out:

Negative employment reports may be seen as the "tip of the iceberg," leading to adjustments in the stock market over the next few quarters.

Multiple Risks Intensify Economic Uncertainty

The slowdown in growth and tariff threats have exacerbated economic uncertainty.

February data has yet to reflect the impact of the U.S. government's spending cuts, and regardless of what measures the Trump administration takes, the trend of economic slowdown seems to have already formed. The annual growth rate of the U.S. economy in the last quarter of last year was 2.3%, lower than the previously sustained growth level of over 3% for several consecutive quarters.

Trump's ongoing tariff threats against other countries also add further uncertainty to the U.S. economic outlook, which could lead to significant volatility in the stock, bond, and currency markets.

Michael Reynolds, Vice President of Investment Strategy at Glenmede, which is based in Philadelphia and manages approximately $47 billion in assets, warned that if the unemployment rate rises, the market will reassess consumer health in 2025. Although he expects the stock market to undergo a "meaningful adjustment," he does not foresee a full-blown bear market.

Signs of a slowdown in U.S. economic growth have already emerged, and data in the coming months will further validate whether this trend is a short-term fluctuation or the beginning of a more serious issue