U.S. payrolls unexpectedly fell by 92,000 in February; unemployment rate rises to 4.4%

The U.S. economy lost jobs in February, a month marred by severe winter weather and a strike at a major health care provider, the Bureau of Labor Statistics reported Friday.Nonfarm payrolls fell by 92,000 for the month, compared to 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.At the same time, the unemployment rate edged higher to 4.4% as jobs declined across key areas. A broader measure of unemployment that includes discouraged workers and those holding part-time positions for economic reasons moved lower, to 7.9% or 0.2 percentage point below the January level.Health care, the primary growth driver in payrolls for at least the past year, saw a loss of 28,000 due largely to a strike at Kaiser Permanente that sidelined more than 30,000 workers in Hawaii and California. Though the strike has since been resolved, it occurred during the BLS survey week so it subtracted from the jobs total.While the jobs picture was weak, wages rose more than expected. Average hourly earnings increased 0.4% for the month and 3.8% from a year ago, both 0.1 percentage point above forecast."I think it just tells us that the hopes that the labor market was steadying, maybe that was too much," Mary Daly, president of the Federal Reserve Bank of San Francisco, told CNBC. "We also have inflation printing above target and oil prices rising. How long they last, we don't know, but both of our goals are in our risks now."Information services, a sector hit by artificial intelligence-related cuts, also lost jobs, down 11,000 as part of a 12-month trend in which the sector has lost an average of 5,000 per month. Manufacturing saw a loss of 12,000, despite tariffs aimed at reshoring jobs from overseas.Federal government employment also fell, off 10,000 for the month.

President Donald Trump's efforts to pare federal payrolls has seen a slide of 330,000 jobs, or 11% of the total workforce, since October 2024, a few months before Trump took office, according to the BLS.Transportation and warehousing also saw a reduction of 11,000. Social assistance was one of the few sectors posting a gain, up 9,000. The weather-sensitive construction industry lost 11,000 after surging by 48,000 in January.Daly cautioned that the labor market data has been volatile."I don't think you can look through this report, but I also don't think you should make more of it than one month of data," she said.The report comes amid a crosscurrent of economic signals.Jefferies economist Thomas Simons called the February payrolls drop "a perfect storm of temporary drags coming together following an above-trend print in January.""Looking through the weather-impacted sectors and the strike, which ended on February 23, this is still a poor jobs number," Simons added. "We do not think that this is a harbinger of progressively worse jobs prints coming down the road, but the risk of a downturn has certainly increased."Though employment gains have been hard to come by, layoffs also have been fairly tame, with a few notable exceptions. Inflation had been moderating, but a recent spike in gas prices following the fighting in the Middle East has raised questions about another jump.Elsewhere, economic growth has been solid, with reports this week showing that both the services and manufacturing sectors are expanding. Consumers have held up fairly well, though there are growing signs that most of the spending is being done by upper-income earners.Federal Reserve officials consequently have taken a cautious approach to policymaking following a series of interest rate reductions. Most central bankers have advocated a wait-and-see approach as they watch both the impact of the rate cuts and geopolitical factors such as tariffs and the Iran war.Following the payrolls report, traders pulled forward expectations for the next cut to July and priced in a greater chance of two cuts before the end of the year, according to the CME Group's FedWatch gauge of futures market pricing.Fed Governor Christopher Waller said earlier in the morning that a weak jobs report could impact policy. Waller has been in the minority of Federal Open Market Committee members pushing for cuts soon."If we get a bad number, January's revised down to some really low number ... the question is, why are you just sitting on your hands? So I could certainly see this meeting going other way, depending on the data this week and [how] the [consumer price index] next week comes in," Waller said on Bloomberg News.The survey of households, which is used to calculate the unemployment rate, showed an even weaker economic picture. That portion of the report indicated a drop of 185,000 in those reporting at work and a rise of 203,000 in the unemployment level. The labor force participation rate edged lower to 62%, its lowest since December 2021.Got a confidential news tip? We want to hear from you.Sign up for free newsletters and get more CNBC delivered to your inboxGet this delivered to your inbox, and more info about our products and services.© 2026 Versant Media, LLC.

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