United States employers
in February and the
, pointing to lingering fragility in a
that was thought to be stabilizing.
decreased 92,000 last month after a strong start to the year, according to Bureau of Labor Statistics data out Friday. The unemployment rate climbed to 4.4 per cent. The
— which was one of the largest since the pandemic — partly reflected a decrease in health care employment due to strike activity.
The report calls into question whether the labour market is actually steadying after the worst year for hiring outside of a recession in decades. While
jumped in January and unemployment insurance claims have settled at a low level, companies may be starting to follow through on a series of previously announced layoffs.
And a recent trend in productivity gains illustrates how spending on artificial intelligence has allowed some firms to get by with leaner staffing.
“The idea the labour market has turned a corner implodes with this report,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a note.
The figures could refocus the Federal Reserve’s attention on the jobs market as it assesses how long to hold interest rates steady. Policymakers have been more attuned to inflation lately — even before the U.S.-Israeli war on Iran sparked concerns among investors about price pressures.
In an interview on CNBC following the report, San Francisco Fed President Mary Daly said, “The hopes that the labour market was steadying, maybe that was too much, and we really have to keep our eye on the labor market.”
The S&P 500 opened lower and two-year Treasury yields, which are sensitive to Fed policy, fluctuated.
The pullback in payrolls included declines in leisure and hospitality as well as construction, which may have stemmed from inclement weather in the month. Manufacturing, transportation and warehousing and information also cut jobs.
Health care and social assistance — which accounted for the majority of overall job growth last year — shed nearly 19,000 jobs. Economists had predicted a strike by more than 30,000 Kaiser Permanente employees for most of the month would weigh on the sector’s payrolls.
Friday’s report suggests the surge in hiring at the start of the year was a “one-off,” said Veronica Clark, an economist at Citigroup Inc. Revisions showed payrolls also declined in December.
What Bloomberg Economics Says…
“February’s weak payrolls suggest the stabilization in hiring in recent months is fragile. We see the labour market as cooling rather than deteriorating sharply — but the softness in hiring reinforces the case for Fed rate cuts later this year.”
— Anna Wong, Stuart Paul and Chris G. Collins
In a separate report out Friday, U.S. retail sales declined in January, restrained by weakness at auto dealers as winter weather-related disruptions tempered some activity.
Population Estimates
The jobs report is composed of two surveys — one of businesses, which produces the payrolls figures, and another of households. The latter included new population estimates from the Census Bureau, which normally are released with the January report but were delayed by last year’s record-long government shutdown.
After the Trump administration’s crackdown on immigration last year, the population was marked down, also drastically lowering the size of the labour force and household survey level of employment.
The participation rate — the share of the population that is working or looking for work — fell to the lowest level since 2021. The rate for workers of ages 25-54, also known as prime-age workers, also declined.
Economists also pay close attention to wage gains as a source of consumers’ propensity to spend. The report showed average hourly earnings rose a solid 0.4 per cent for a second month.
The report contrasts from some other recent data that had suggested the labour market was finding its footing. Employment levels have been “generally stable” in recent weeks, according to the Fed’s Beige Book survey of regional business contacts out earlier this week.
“You’re never going to completely change the narrative with one report, but I think it does call into question just how firm is that stabilization?” said Michael Pugliese, a senior economist at Wells Fargo & Co. “Is it fragile? Or is it well established? There’s a big difference between those two.”
It remains to be seen how AI will impact the labour market going forward. Oracle Corp. is planning to axe thousands of jobs to offset rising costs from a massive buildout in data centres, and some of the cuts will be aimed at categories it sees less of a need for due to the technology.
On the other hand, AI is currently having “little to no impact” on the hiring plans of ZipRecruiter Inc.’s customers, chief executive Ian Siegel said on a Feb. 25 earnings call.
—With assistance from Augusta Saraiva, Jarrell Dillard, Chris Middleton and Vince Golle.