• Nonfarm payroll employment rose 151k overall and 140k private; private job gains are in line with trend but there were some other details in the report that were soft

• The unemployment rate rose from 4.0% to 4.1% (4.14%) even while participation fell two-tenths of a percent

• The workweek held at the cycle low of 34.1 and aggregate hours worked are down over the last three months, supportive of the idea that GDP growth slowed materially this quarter despite still decent job gains

• Weather may have still been a drag in February, though likely less so than in January

• Government net hiring was weak, but announced job cuts at the federal level probably haven’t started to appear in this data yet

The headline jobs number in the February employment report was decent certainly better than some feared—but most of the details of the report were soft. Nonfarm employment increased 151k last month, with only modest revisions to prior months. This was close to the average seen over the last year. However, the unemployment rate rose from 4.01% in January to 4.14% last month. And after dipping in January, the average workweek failed to recover last month, staying unchanged at a very low 34.1 hours. In a similar sign of less intensive labor demand, the number of people working part-time but who want full-time jobs jumped 460k last month, leading the U-6 measure of labor market underutilization to leap 0.5%-point to a cycle high of 8.0%.

Average hourly earnings increased an expected 0.3% last month, and with downward revisions to the prior two months the year-ago gain was unchanged at 4.0%. The three-month average annualized increase in labor income slowed to 3.9% last month. While this is the lowest number of this boomy cycle, it would still be enough to support decent real spending gains, provided purchasing power isn’t frittered away on import taxes.

While today’s report was soft, it wasn’t worryingly disappointing. We recently lowered our tracking of 1Q real annualized GDP growth to 1.0%, with the next major checkup coming with the February retail sales report. For the Fed, the March meeting is an easy pass. But the lingering signs of softness in this report should keep their easing bias comfortably intact. Getting into the establishment survey, private employment rose 140k, exactly in line with the 142k trailing six-month average, within which goods-producing employment ran stronger than trend and service-providing weaker. Goods-producing employment jumped 34k with gains in every category. Increases in mining and logging (+5k) and construction (+19k) might have included some recovery from cold January weather, while a 10k increase in manufacturing could have reflected some front-loading ahead of expected tariffs. Private service- providing jobs rose 106k, with weakness in a few different areas. Retail employment fell 6k; we had thought some pullback could occur after rising an average of 32k in the prior two months around the holidays, plus there were 10k workers on strike at Kroger. Restaurants fell 28k, another weak print similar to last month, and perhaps one sign that cold weather was still a drag on February employment in some sectors.

On the other hand private education and health care hiring was quite steady at +73k. Turning to the workweek, this was the second straight month hours worked were at 34.1, which is the low for the cycle. That means that despite still decent job growth, aggregate private hours worked are down 0.7% annualized over the last three months. Government employment gains were soft at 11k after averaging 35k in the prior six months, though this still doesn’t yet reflect most or any of the planned federal government layoffs, with weaker federal employment (-10k) probably stemming more from the hiring freeze. State education employment fell 5k, which might reflect a drop in grant support for universities, though note that this size of employment swing is not unusual.

As stated above the household survey was on the softer side. Not only did the unemployment rate just barely manage to stay at 4.1% instead of rounding up to 4.2%, but the participation rate fell from 62.6% to 62.4%, the lowest since the start of 2023. The fall in participation was among younger and older workers, and more encouragingly the prime-age (25-54 year old) participation rate held steady. The total number of unemployed persons rose 203k, with the largest gains coming among labor force re-entrants and people who had completed temporary jobs. Permanent job losers rose 40k, but they are still little changed from a year earlier, which is a good sign. The number of people not at work because of weather was 404k, which is 61k higher than the average over the last 20 years, so still somewhat elevated, though less so than in January when the figure was 256k greater than the trailing average.