Last Friday's employment report elicited mixed reactions in the market, with initial optimism soaring before deteriorating as we delved deeper into the details of the report.
FxPro senior analyst Alex Kuptsikevich noted: The overall figures in the report were better than expected, which has become a norm over the past few years. The US economy created 275,000 jobs in February, far exceeding the expected 200,000.
However, most of the other numbers were less optimistic. First, last month's number was adjusted down from 317,000 to 229,000. This shifted the perception of the labor market in January from "dangerously overheated" to "in trend".
Wage growth month-over-month was 0.1%, and year-over-year growth was 4.3%, both 0.1 percentage points lower than expected. This rate has hovered around this level for the past 12 months. While this is higher than the 2.0-2.5% growth rate we saw from 2009 to 2017, it does not increase the risk of accelerated inflation.
The Bureau of Labor Statistics provided a more subdued interpretation in another report based on a household survey. The official unemployment rate rose from 3.7% to 3.9% in February (with no change expected). The labor force participation rate remained unchanged at 62.5%.
The survey indicated that employment has declined for three consecutive months, dropping by 898,000 to 16.097 million. This is the lowest level since April 2023. Considering those who wish to work full-time, the U-6 unemployment rate increased to 7.3%, the highest level since December 2021, showing an upward trend over the past 10 months.
The gap between non-farm payroll (NFP) data and household employment data has narrowed to a historic low of 3.16 million (only seen in April 2020).
Thus, the US labor market report indicates relative weakness, suggesting that some indicators are deteriorating. On one hand, this brings the Federal Reserve's interest rate cut closer. But let's be realistic: rate cuts follow market volatility and significant sell-offs. At least, that has been the case over the past half-century.
