February jobs report expected to show hiring slowed while unemployment rate held steady

The US economy created more new jobs than expected in February, while an increase in the unemployment rate for the first time in four months and downward revisions to job growth in prior months suggested signs of some softening in the US labor market.

Data from the Bureau of Labor Statistics released Friday showed the labor market added 275,000 nonfarm payroll jobs in February, significantly more additions than the 200,000 expected by economists. Meanwhile, the unemployment rate increased to 3.9% from 3.7% in January. This marks the first increase in the unemployment rate in four months, as it now sits at its highest level in the last two years.

A revised 229,000 jobs were added in January, according to the report, down from the 353,000 initially reported. In total, revisions showed there were 167,000 fewer jobs added in December and January than previously expected.

Meanwhile, wages increased 0.1% on a monthly basis in February, slower than the 0.2% economists expected.

The downward revisions of previous months' job gains, coupled with the lower-than-anticipated wage growth, led one economist to conclude the Fed will be less concerned that a strong labor market will drive a resurgence in inflation.

"Alongside the rise in the unemployment rate to a two-year high and a much weaker rise in wages, there is less reason now to be concerned that renewed labour market strength will drive inflation higher again," Capital Economics chief US economist Andrew Hunter wrote in a note to clients.

Read more: Inflation update on everyday expenses: Prescription drugs down, pet care way up

Elsewhere in the report, the labor force participation rate stayed flat at 62.5%, and the average weekly hours worked increased from 34.1 to 34.3.

The largest jobs increases in Friday's report were seen in healthcare which added 67,000 jobs in February. Meanwhile, government employment added 52,000 jobs.

On Wednesday, Federal Reserve Chair Jerome Powell described the labor market as "relatively tight" but noted that "supply and demand conditions have continued to come into better balance" during his semiannual testimony in front of lawmakers on Capitol Hill.

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Markets entered Friday betting that the first Fed interest rate cut will come in June, per the CME FedWatch Tool. For the year, investors are pricing in a range of three to four rate cuts, per Bloomberg data.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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