U.S. non-farm employment growth in February increased by 151,000, slightly below expectations, while the unemployment rate reached a new high since November of last year

The U.S. job market maintained steady growth in February, but the unemployment rate unexpectedly rose, presenting a mixed picture.

On March 7th, Friday, the U.S. Bureau of Labor Statistics released data showing:

• Non-farm payrolls increased by 151,000 in February, below the expected 160,000, with the previous value revised down from 143,000 to 125,000.
• The unemployment rate in February was 4.1%, higher than the expected and previous value of 4%.
• Average hourly earnings in February increased by 0.3% month-on-month, in line with expectations, with the previous value revised down from 0.5% to 0.4%. Year-on-year, average hourly wages grew by 4%, with expectations and the previous value at 4.1%.
• Average weekly hours in February were 34.1 hours, with expectations at 34.2 hours and the previous value at 34.1 hours.
• The labor force participation rate in February was 62.4%, below the expected 62.6% and the previous value of 62.6%.

In terms of specific industries, the main drivers of job growth came from healthcare, transportation, and financial activities, while job growth in manufacturing and retail was relatively weak.

At the same time, government employees, which have been an important factor driving non-farm employment growth in recent years, saw the weakest increase in nearly a year, with the number of federal government employees experiencing the largest decline since June 2022. Specifically, in February, the number of federal government jobs decreased by 10,000, while overall government employment increased by 11,000.

The non-farm employment report consists of two surveys—one targeting businesses to provide employment data, and the other targeting households to derive unemployment and labor participation rate data. The household survey also includes an independent employment indicator, which showed a decline of nearly 600,000 jobs, marking the largest drop in over a year.

The rise in the unemployment rate reflects that more people are permanently losing their jobs. The unemployment rate among the Hispanic population and those without a high school diploma has risen particularly significantly. The proportion of part-time workers due to economic reasons has climbed to a nearly four-year high, further pushing up the broader measure known as the "underemployment rate," which has reached its highest level since 2021.

The labor participation rate in February, which is the proportion of the population that is working or looking for work, fell to its lowest level in two years, primarily among men. Meanwhile, the labor participation rate for the core working-age group of 25 to 54 years remained at 83.5%.

The market is also closely watching how the dynamics of labor supply and demand affect wage growth, especially against the backdrop of potential renewed inflation risks. This report shows that, after downward revisions, average hourly wages in February increased by 0.3% compared to January, slightly lower than the previously revised down figure of 0.4%.

Additionally, the report indicated that 404,000 people were unable to work due to weather conditions, the highest number for February in four years. Furthermore, the unemployment rate for foreign workers reached its highest level since 2021.

Analysis and Commentary

Analysts believe that this non-farm employment report further confirms the trend of a weakening job market in the U.S. The report indicates that an increasing number of people are permanently unemployed, the number of federal government employees is decreasing, the proportion of part-time workers due to economic reasons has surged, and the number of Americans holding multiple jobs has climbed to a historic high of nearly 8.9 million The backdrop of the aforementioned weakness coincides with concerns about the overall economic outlook of the United States triggered by President Trump's policies. Recent inflation data has shown stickiness, and consumer spending has begun to slow down. If this trend continues, it may prompt businesses to reassess their hiring plans. This has also heightened market worries about the possibility of stagflation facing the U.S. economy.

Economist Augusta Saraiva believes that the employment data for February is mixed. Job growth indicates that the U.S. economy still has some resilience, but the rising unemployment rate also serves as a reminder to pay attention to potential economic risks.

This non-farm payroll report is the first to fully reflect the situation during President Trump's second term. According to another piece of data released on Thursday, the U.S. government's actions to reduce its workforce have led to the highest number of layoff announcements since the early days of the COVID-19 pandemic. Economists predict that due to federal layoffs and their spillover effects, the U.S. may lose over 500,000 jobs by the end of this year.

Trump has also sought to bring manufacturing jobs back to the U.S. by imposing tariffs, a measure that has prompted some companies, such as Apple and HP, to consider increasing domestic investment. However, on the other hand, aluminum giant Alcoa has warned that these tariff measures could lead to the loss of 100,000 jobs.

Furthermore, any measures to restrict immigration or deport immigrants will limit an important source of job growth in the U.S. in recent years.

Although the number of unemployment claims is nearing pre-pandemic levels, several well-known companies, including Goldman Sachs and Disney, have recently announced large-scale layoffs. Coupled with the chain reaction of federal layoffs, the unemployment rate may rise further in the coming months.

Federal Reserve officials have previously stated that they want to see more evidence of sustained easing of inflation before resuming interest rate cuts, including the upcoming CPI data to be released next week. The market generally expects the Federal Reserve to keep interest rates unchanged at the March meeting. Analysts believe that given the high uncertainty brought about by the Trump administration's policies, traders still expect the Federal Reserve to cut rates by about 75 basis points this year.

Market Reaction

After the release of the U.S. non-farm data, futures for the three major U.S. stock indices rose across the board. Nasdaq futures were up 0.8% for the day, S&P 500 futures rose 0.6%, and Dow futures increased by 0.5%.

U.S. Treasury yields rose slightly, with the 10-year Treasury yield edging up to 4.269%.

Spot gold continued to rise, up 0.25% for the day, priced at $2919.47 per ounce.