Announced this morning, the economy lost -92,000 jobs in February, much lower than the increase that was expected. Reviewing the individual industries, the Financial Activities industry was relatively strong, while the Health Care and Social Assistance industry was among those that were weak. The Unemployment Rate was 4.4%, higher than expected and one tenth above the previous month. Average Hourly Earnings increased 0.4% in February, higher than expected, and grew 3.8% on an annual basis. The Labor Force Participation Rate decreased slightly to 62.0%, and Average Weekly Hours were 34.3, which is the same as the previous month.
Meanwhile, headline Retail Sales fell -0.2% in January, as difficult weather hurt auto sales. The Control Group, which is a closer measure of the inputs for GDP that excludes sales of food, autos, building materials, and gas stations, increased 0.3% in January, as expected, and was a decent rebound from the flat reading in the previous month.
Overall, a weak February payrolls report as jobs were lost in the economy, and the unemployment rate ticked higher. A number of industries were weak, including the health care and social assistance industry, which had been a source of strength in previous months. Wages grew in February more than expected, and the annual wage increase remains above the 30-year average. While headline retail sales were negative in January, partly due to difficult weather conditions, the control group was positive and rebounded from the previous month.
These data points indicate the labor market is relatively weak at the start of the year, even as inflation measures are slightly elevated. The Federal Reserve will have a lot to think through, considering a relatively weak labor market, increasing energy prices amidst the Iran conflict, and the tailwinds from the OBBBA impacting the economy at the start of the year. How these factors unfold will be key for markets and the economy in the coming weeks.
In all, the yield on the 10-year US Treasury is lower following the report and equity futures are lower as we head into the market open.
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