February Employment Report Preview

We expect the February payroll report to show a gain of 43k jobs. This would be a notable step-down from the prior month’s reading of 130k, and we think February will show a print that is more indicative of a labor market that has cooled but not stalled. January’s payroll growth was boosted by outsized gains in construction and private education/healthcare that will not likely be repeated, though healthcare payroll growth should continue to lead the way and dominate job gains. We expect the unemployment rate to remain at 4.3%. There is more uncertainty than usual regarding the unemployment rate because the BLS annual population control adjustments, typically introduced in the January employment report, will be present in this one instead. Collectively the data describes a labor market that has transitioned from thriving and tight to balanced and cautious. The “low fire, low hire” dynamic represents a tenuous equilibrium, and we expect additional softness in the coming months, with a gradual rise in the unemployment rate, but we also expect resilient growth to arrest excessive weakness. We explore this further in our recent piece Labor Market Snapshot: A Tenuous Equilibrium .