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U.S. Payrolls Drop 92,000 in February; Unemployment Rises to 4.4%

In February 2025, U.S. nonfarm payrolls unexpectedly decreased by 92,000, and the unemployment rate rose to 4.4%. The decline was largely due to severe winter weather and a strike at Kaiser Permanente, which cost the healthcare sector 28,000 jobs. Despite the job losses, average hourly earnings grew more than forecast. Federal Reserve officials expressed caution, highlighting risks from inflation and geopolitical factors. The White House linked the slowdown to policies against illegal immigration. Economists view the report as a temporary setback but note increased downside risks for the labor market.

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U.S. Payrolls Drop 92,000 in February; Unemployment Rises to 4.4%

The U.S. economy shed 92,000 nonfarm jobs in February, defying expectations of growth and lifting the unemployment rate to 4.4%, as severe weather and a major healthcare strike dampened hiring.

Unexpected Decline

Nonfarm payrolls fell by 92,000 for the month, compared with the estimate for 50,000 and below the downwardly revised January total of 126,000. February marked the third time in the past five months that payrolls declined, following a sharp revision showing a drop of 17,000 in December.

Sectoral Impacts

  • Healthcare: Lost 28,000 jobs due to a strike at Kaiser Permanente that affected over 30,000 workers in Hawaii and California.
  • Information Services: Down 11,000, part of a 12-month trend with average monthly losses of 5,000.
  • Manufacturing: Decreased by 12,000 despite tariffs aimed at reshoring jobs.
  • Federal Government: Fell by 10,000; since October 2024, federal payrolls have dropped by 330,000 jobs (11% of the workforce).
  • Transportation and Warehousing: Reduced by 11,000.
  • Construction: Lost 11,000 after a surge of 48,000 in January, sensitive to weather.
  • Social Assistance: One of the few gainers, up 9,000.
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Wage Growth

Average hourly earnings increased 0.4% for the month and 3.8% from a year ago, both 0.1 percentage point above forecast.

Expert Opinions

Mary Daly, president of the Federal Reserve Bank of San Francisco, said the data suggests the labor market may not be steadying as hoped, with inflation above target and oil prices rising. Thomas Simons of Jefferies called it a "perfect storm of temporary drags" but not necessarily a harbinger of worse times. White House advisor Kevin Hassett attributed the slowdown to reduced illegal immigration, stating the economy remains strong.

Economic Context

The report comes amid mixed signals: solid economic growth, expanding services and manufacturing sectors, but rising gas prices and geopolitical tensions. Long-term unemployment surged, with the average duration at 25.7 weeks, the longest since December 2021. Federal Reserve officials are cautious, advocating a wait-and-see approach after recent rate cuts.

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