The February jobs report delivered mixed headline figures but the labor market remains resilient, leaving the forecast for Federal Reserve rate cuts materially unchanged, experts say.
U.S. nonfarm payrolls expanded by 151,000 last month, the Bureau of Labor Statistics said Friday, lower than economists’ forecast for the creation of 160,000 jobs. Additionally, the December and January jobs reports were revised down by a combined 2,000.
The unemployment rate, which is derived from a separate survey, ticked up to 4.1% from 4.0% the prior month. Economists expected the unemployment rate to remain unchanged. Average hourly earnings increased 0.3% in February to match estimates.
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Uncertainty around trade policy and a resilient labor market have made the Federal Reserve’s rate-setting committee, the Federal Open Market Committee (FOMC), more attentive to rising inflation risks. Market participants were expecting just one or two rate cuts in the year ahead, but odds of the FOMC easing with perhaps a bit more alacrity are on the rise.
“Alone, today’s report shouldn’t have much impact on the near-term policy decisions of Federal Reserve officials,” writes Russell Price, chief economist at Ameriprise Financial. “However, further moderation in the number of jobs created each month could cumulatively lead to heightened concerns for economic growth over inflation in the months ahead – thus hiking expectations for Fed fund rate cuts.”
As of February 10, futures traders assigned a 95% probability to the FOMC keeping rates unchanged at the next Fed meeting, up from 88% a day ago, according to CME FedWatch. The FOMC’s June meeting is the current betting favorite for the next rate cut, with odds sitting at 54%.
With the February jobs report a matter of record, we turned to economists, strategists, portfolio managers and other experts for their thoughts on what the data mean for markets, macroeconomics and monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.
February jobs report: The experts weigh in
“This morning’s employment report came in largely as expected, which should provide some relief for markets. There had been fears of significantly weaker jobs data on signs of recent economic weakness and changes in government employment. While this morning’s mostly in-line report probably doesn’t change Fed expectations materially, at the margin it may increase the likely number of Fed cuts for 2025. At the beginning of 2025, the market had been pricing in one to two cuts this year and is now expecting around three, given recent signs of economic weakness. Having the Fed’s next move be a rate hike – a possibility that looked like a real one a couple months ago – is notably less likely now.” – David Royal, chief financial and investment officer at Thrivent
“The bad news is that the employment report is not bad enough. Given Waller’s comments yesterday, February’s unemployment report is not sufficient impetus to move the FOMC towards a March cut.” – Brad Conger, chief investment officer at Hirtle Callaghan & Co.
“Today’s jobs report is unlikely to change the Fed’s wait-and-see stance, and a rate cut at the next meeting remains unlikely. Beyond March, policy direction is difficult to predict given the rapidly evolving political and economic landscape. The next dot plot will provide key insights into the Fed’s outlook and whether the Fed moves more in line with the market’s aggressive rate path.” – Mike Sanders, head of fixed income at Madison Investments
“The backward-looking aspect of the employment report reduces the impact of today’s release. Job growth and the headline unemployment rate came in as expected but, we know the job market is seeing real-time shifts which occurred after the cut-off date for the February jobs data. Average hourly earnings show some reduced inflation pressures, but the workweek remains subdued which will lessen the outlook for consumer incomes, and hence spending and growth, going forward. We can expect the March employment data to tell a more complete picture. Overall, concerns about future growth are most important to the markets.” – Steve Wyett, chief investment strategist at BOK Financial
“Today’s employment report does not bode well for future metrics. A 10% increase in the number of part-time workers who desire full-time employment pushed the underemployment rate up 50 basis points to 8.0%. Taken together with falling hiring rates and quit rates, labor market weakening is becoming more apparent.” – Ronald Temple, chief market strategist at Lazard
“The February payrolls data wasn’t soft enough to change the Fed’s calculus, but we are eager to hear how they are thinking about the bigger picture. Recently, there have been a handful of data points pointing towards a growth slowdown, and we think the Fed’s bias is still tilted towards easing.” – Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management
“This was a critical print after confidence on the economy has taken a turn and market participants were looking to either confirm or reverse that sentiment. While a slight miss, February’s print will likely ease overly sour expectations on the economy. Average hourly wage growth was as expected at 0.3% and manufacturing jobs ticked up. All-in, there’s no clear sign to take from this print and the path ahead will be muddy. DOGE cuts will not start to materialize until March’s print and the impact of immigration will continue to be in focus.” – Lara Castleton, U.S. head of portfolio construction and strategy at Janus Henderson
“While volatility will likely remain a challenge for now, it might not be time to bet against the U.S. The U.S. consumer is still okay even if sentiment is softening and savings is higher.” – Scott Helfstein, head of investment strategy at Global X
“To sum it up: today’s print wasn’t as bad as feared. Payrolls growth surprised slightly to the downside and the unemployment rate ticked up justifying the momentum that’s been building for a resumption in the Fed’s cutting cycle.” – Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management