US labor market remains steady in February – NFP
US nonfarm payrolls rose by 151K jobs in February compared to downwardly revised 125K in January, and slightly missed expectations for 159K rise.
February Labor report, the first under new administration of President Donald Trump, showed that job growth picked up in February, the unemployment rate ticked up to 4.1% from 4.0% in January / consensus, while average earnings edged up to 4.0% y/y from downwardly revised 3.9% previous month but missed expectations at 4.0%.
The data signaled that the US labor market is in good shape overall, but growing uncertainty over trade policy and expected strong cuts in federal government spending are likely to hurt labor market’s resilience in coming months.
Trump’s shock trade policies caused hard times for businesses, which resulted in fall in business and consumer confidence and reversal of most gains from the period of euphoria after Trump’s election victory in November.
Apart from a trade war that was sparked on Trump’s new 25% tariff on imports from Mexico and Canada (although Trump delayed tariffs on Canada and Mexico imports for one month), along with a doubling of duties on Chinese goods to 20%, another significant factor – layoffs of federal government workers by Elon Musk’s Department of Government Efficiency, did not show up in the employment report as most of this action happened outside the survey week.
However, government employment, one of the main pillars of job growth in recent years, was slowed by Trump’s decision to freeze funding and hiring in a number of governmental organization and this is expected to show full impact on March’s labor report.
In the current circumstances, the labor market is expected to underpin the economy, which is still in the mode of slow expansion, however, drop in consumer spending and widening trade deficit, send strong warning signals and prompted economists to downgrade GDP forecasts from initial 2.0% to 1.5%, after the economy grew by 2.3% pace in the last three months of 2024.