February’s Jobs Report: Not Too Hot, Not Too Cold

The U.S. delivered a goldilocks jobs report on Friday, with February’s nonfarm payrolls data coming in healthy, but not too hot. A combination of a robust February but downward revisions in January and December, convincing most analysts that Federal Reserve interest-rate cuts are likely still on track to start sometime this summer.

The Labor Department reported Friday that nonfarm payrolls grew by 275,000 in January, easily exceeding expectations of 198,000. Conversely, though, unemployment did tick higher to 3.9%, and January and December payrolls were revised lower by a combined 167,000. Here’s a quick look at the most pertinent details, most of which exceeded expectations and illustrated a still-resilient economy.

• February payrolls: +275,000 (vs. +198,000 est.)
• February unemployment: 3.9% (vs. 3.7% est.)
• February hourly earnings: +0.6% (vs. +0.3% est.)
• January payrolls (revised): +229,000 (vs. +353,000 previously)
• December payrolls (revised): +290,000 (vs. +333,000 previously)

“Today’s employment report is a little like dealing with an overinflated tire,” says Jason Pride, Chief of Investment Strategy & Research at Glenmede. “Even after a little air gets let out, the pressure is still relatively firm.” The 20 Fastest-Growing Jobs of the Next Decade Digging deeper into the February jobs report, notable gains were made in health care (+67,000 jobs), government employment (+52,000), and food services and drinking places (+42,000), among other fields. In the meantime, there were only a few pockets of weakness, including employment services (-14,000), administrative and support services (-11,000), and private educational services (-6,000). “Today’s non-farm payrolls were an encouraging data point,” says Michelle Cluver, Head of ETF Model Portfolios at Global X. “While high, [February’s print] was broadly in line with market expectations. However, there was a high level of data volatility with large revisions to the prior data. This helps reinforce the message that January’s data shouldn’t be viewed as the start of a trend and supported markets increasing their expectations for a June rate cut.”

Expert Reactions to February’s Jobs Report

Here’s what strategists, financial managers, and other experts had to say about the February employment situation:

Ryan Detrick, Chief Market Strategist, Carson Group

“Once again, jobs came in better than expected, pushing back in any recession calls. What stands out is wages only grew 0.1%, which was low and didn’t raise any inflationary alarms. All in all, this was a very positive report. The bottom line is our economy continues to chug along, being led by employment. Given the consumer makes up close to 70% of our economy, this is a very positive sign for strong consumption in ’24.” The 24 Best ETFs to Buy for a Prosperous 2024

Jeff Schulze, Head of Economic and Market Strategy, ClearBridge Investments

“Taken together, a rebound in the work week and drop in average hourly earnings suggests that last month’s hot wage print was largely the result of mix-shift issues, with bad weather more likely to keep hourly workers off the job and thus remove a disproportionate share of them from the wage equation, which is then skewed more toward higher earners. This same dynamic was why wages appeared to spike during the early pandemic and then collapse during the reopening as hourly workers returned to the job. “Cooling on the wage front will be a welcome development for the Fed and is consistent with the decline in the quits rate (to cycle lows) which tends to lead average hourly earnings. Continued normalization in wages coupled with a weak CPI print next week could increase the FOMC’s confidence that inflation is on track to returning to target, potentially moving forward the prospects of rate cuts.”

Lindsay Rosner, Head of Multi-Sector Fixed Income Investing, Goldman Sachs Asset Management

“Markets have generally been in “more jobs, less cuts” mode, but today’s number pumped the brakes on that mantra. The more reasonable, albeit still strong, February print coupled with the two-month payroll net revision spoke to the larger theme of a tight-but-normalizing labor market and an environment that can lend marginally more confidence to the Fed who is looking to shore up their own. “We anticipated that February’s print would be lower than the red-hot January number due to January’s distortions—namely, seasonals and softer year-end layoff effect—however a bit elevated still due to a boost from workers returning after the mid-January storms. … Big picture: these were helpful numbers for the Fed to gain confidence. Let’s see what happens with the [Summary of Economic Projections] dots.” Today’s 10 Fastest Dying Careers [2024]

Jason Pride, Chief of Investment Strategy & Research at Glenmede

“Every month that goes by where the job market is largely unfazed by peak monetary policy headwinds widens the path to soft landing in the U.S. History suggests that those long and variable lags of monetary policy should be felt around now, so the fact that the labor market is holding up reasonably well should be a reassuring sign for the Fed. This report likely doesn’t move the needle for the Fed’s rate cut path all too much, as the base case remains about three rate cuts this year beginning around summer.”

Adam Hetts, Global Head of Multi-Asset, Janus Henderson

“An ostensibly strong labor report has some mixed messages under the surface, and overall should keep current rate cut expectations in line. Strong payrolls at 275k, unemployment still below 4%, and strong enough wages are great news for the US economy but potentially bad news for sticky inflation. On the other hand, there were large revisions to prior months, unemployment moved up, and wages were below expectations. “Overall, the risk of sticky inflation remains and we are focused on areas that can see some cyclical upswing from the strong economy but with quality earnings and a valuation buffer in case the rate environment remains a headwind for longer than generally expected.”

Joe Gaffoglio, President, Mutual of America Capital Management

“Today’s healthy jobs report, on the heels of January’s surprisingly strong numbers, continues to highlight the strength of the job market amid a generally strong U.S. economy. “Despite the strong job market and healthy wage growth in recent years, many middle-class consumers are still grappling with high prices for various goods and services that they use every day. Along with higher borrowing costs and reduced pandemic savings, we could see stress continue to build on consumers. Given the outsized role of consumer spending in the U.S. economy, we will continue to closely monitor factors such as the recent rise in subprime auto loan and credit card delinquencies.”

David Russell, Global Head of Market Strategy, TradeStation

“Unemployment was higher than expected, wage growth was lower and some of January’s big gains were revised out. That reduces worries about an overheating economy and puts the soft-landing narrative back in play. Cost pressures continue to stabilize, keeping the Fed on track for cutting rates. The market has fought a rising tide of higher rates for two years and now may finally get some relief.” ‘Dirty Dozen’: 12 Tax Scams to Watch Out For [And How to Avoid Them]