- U.S. nonfarm payrolls unexpectedly fell 92,000 in February, missing forecasts sharply.
- Unemployment rate rose to 4.4% from 4.3% amid healthcare strike impact.
- Healthcare lost 28,000 jobs mainly due to Kaiser Permanente workers' strike.
- Wages rose 0.4% monthly and 3.8% yearly, exceeding economist expectations.
The U.S. labor market delivered a stark reversal in February, shedding 92,000 jobs, the sharpest monthly drop since the early pandemic era, after posting a solid gain of 126,000 (revised down from an initial 130,000) in January.
A major healthcare strike and a wicked winter conspired to freeze hiring and reveal underlying weakness in the U.S. labor market are being cited for the poorer performance. Unemployment rate increased to 4.4 percent as compared to the January level of 4.3 representing a low level historically and according to economists, as only after 4.5 percent would cause alarm.
The more inclusive unemployment measure of discouraged workers and part-timers due to economic reasons in fact fell 0.2 percentage point to 7.9 percent with healthcare, which has traditionally been the most stable job sector, registering the largest losses of 28,000 workers, mostly due to a four-week walkout by over 31,000 nurses and other frontline workers at Kaiser Permanente in California and Hawaii that started January 26 and ended February 23.
AI's Huge Impact on Jobs Begins
The strike was one of the biggest unrestricted healthcare strikes in the U.S. history, which put workers out of work at the time of the BLS survey reference week, effectively subtracting the figure. Other industries suffered the blow: information services (victim to AI-driven layoffs) lost 11, 000; manufacturing lost 12, 000 in spite of tariff moves to reshore jobs; federal government employment lost 10, 000, which was part of a larger 330, 000-job decline (11% of the workforce) since October 2024 under the press of downsizing by President Trump; and transportation and warehousing lost 11, 000.
Social assistance reversed the trend with a slight increase of 9,000.Average hourly earnings increased more than expected, 0.4% in a month and 3.8% in a year, both small negative surprises, indicating enduring wage pressure despite the halting of hiring.
Jefferies economist Thomas Simons called the report a perfect storm of temporary drags coming together after an above-trend increase in January, but said: "What this report is telling us is that the wage pressure continues, with hiring stagnant. We do not believe that it is a foreshadowing of the increasingly poorer job print down the road, but the threat of a downturn has definitely been raised.
Watch Out For Oil Prices: Fed Official
Federal Reserve Bank of San Francisco President Mary Daly told CNBC: "I think that was too much joy over the steadying of the labor market. We also have over target inflation printing and oil prices on the increase. We do not know how long they will last, but now both of our ends are in our dangers. She also inserted the volatility in the data: I do not think you can look through this report, she said, and I do not think you should make more of it than a month of data. But layoffs are docile as a rule."
The report is in tune with skyrocketing gasoline prices, over 20 cents a gallon since U.S.-Israel attacks on Iran last weekend, and a stock market spurt triggered by the escalating Middle East war. The downside risks that economists are looking at include the possibility of hiring more workers should the war continue and discourage consumer spending by more affluent households, CME FedWatch reported.
Fed Governor Christopher Waller a believer in faster easing, indicated that a bad report would change things: "It is why, if we get a bad number, why not why are you just sitting on your hands?" In the mean time, the reversal of February makes it clear that there is a labor market that is stabilizing imbalanced amid tariffs and immigration restrictions as well as global shocks.
