LIVE MARKETS-Could've been worse: A jobs report deep dive

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

COULD'VE BEEN WORSE: A JOBS REPORT DEEP DIVE

The February employment report, which arrives at a time of heightened uncertainties regarding policy and deteriorating demand, was fairly calm on the surface of it.

The U.S. economy added 151,000 jobs in February USNFAR=ECI, a 20.8% monthly increase, but weaker than the 160,000 consensus.

In addition to missing expectations, the number follows a January number that was revised 12.6% lower, to 125,000 from 143,000, likely due to the brutal cold weather that swept much of the United States in the first few weeks of the year.

This marks the seventh downside surprise in the past 12 months, and the ninth reading south of the 200,000 over the past year.

"This is not an overly weak report and it's not an overly strong report," Peter Cardillo, chief market economist at Spartan Capital Securities told Reuters. "It's within the average job creations over the past several months and that suggests that the economy is still somewhat resilient, although challenges persist."

Digging beneath the headline, service-providing jobs accounted for 75.7% of the 140,000 private sector job adds. The retail sector shed 6,300 jobs, while government payrolls - which include state and local agencies unaffected by the mass DOGE-related firings - increased by 11,000.

Among analyst comments, there seems to be common inkling that mass DOGE layoffs, tariff effects, immigration crackdowns and other policy decisions will show up in the data over the coming months.

"Next month, we are sure to see the impact of federal layoffs in the economy, but there are other, slower moving but certainly harmful policy trajectories to watch out for," writes Hilary Wething, economist at the Economic Policy Institute.

The report also gave markets their first gander at February inflation, showing average hourly wages rose by 0.3%, cooler than the prior month's 0.4% print and inline with analyst expectations.

Year-over-year, however, wage growth added some heat, rising to 4.0% from 3.9%, but still a tad cooler than the 4.1% economists predicted.

Even so, 4.0% is too far north of the Fed's 2% annual inflation goal for Powell & Co's comfort.

The jobless rate USUNR=ECI surprised by edging up to 4.1% - analysts expected it to stand pat at 4.0% - while at the same time the labor market participation rate fell by 20 basis points to 62.4%.

That's the lowest it's been in over two years.

"The unemployment rate edged up on the month and would have risen more if hundreds of thousands of workers hadn't given up on looking for a job," writes Bill Adams, chief economist at Comerica Bank.

Ordinarily when workers leave the data pool they are no longer considered unemployed. So if the unemployment rate goes up while the participation rate goes down, that hints at spiking layoffs, a notion confirmed by Thursday's Challenger report.

"We see downside risks to the labor force participation rate due to demographic changes, the slowdown in economic growth this year, and a sharp slowdown in net immigration," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics.

Perhaps the most worrisome aspect of the February report is the metric often called "real" unemployment - or "underemployment" - which includes those only marginally attached to the workforce and those working part time for economic reasons.

That number surged from to 8.0% from 7.5%, the highest it's been since October 2021.

Last month, 4.9 million Americans were on part-time schedules because that's all they could get. That's the most since May 2021.

"Under the surface, today's data ... show some emerging weakness in jobs at the margins," says David Royal, chief investment officer at Thrivent. "Notably, the number of people employed part time for economic reasons increased by 460,000."

Meanwhile, the report showed a 0.5 percentage point narrowing of the White/Black unemployment gap.

Joblessness among Black workers dipped to 6.0% from 6.2%, while white unemployment increased to 3.8% from 3.5%.

Unfortunately, however, Americans who identify as Hispanic saw their jobless rate jump to 5.2% from 4.8%.

(Stephen Culp)

FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:

U.S. STOCKS FIGHT TO STABILIZE, AWAIT POWELL REMARKS - CLICK HERE

U.S. STOCK FUTURES CHURN, YIELDS FALL, AFTER LATEST JOBS DATA - CLICK HERE

EUROPEAN BANK RALLY 'FASTER AND STRONGER' THAN PREDICTED - UBS - CLICK HERE

MAG 7? MORE LIKE 'LAG 7'... - CLICK HERE

EUROPEAN STOCKS FALL ON U.S. TRADE POLICY CONFUSION - CLICK HERE

EUROPE BEFORE THE BELL: FUTURES LOWER AS TRUMP FLIP-FLOPS ON TARIFFS - CLICK HERE

PAYROLLS AND POWELL PROVIDE FOCAL POINT - CLICK HERE