The non-farm payroll report released on Friday dashed market hopes, triggering a sharp rise in investor concerns over the health of the U.S. labor market...
The non-farm payroll report released on Friday showed that US employers unexpectedly cut jobs in February, with the unemployment rate rising, raising doubts about the health of the labor market.
The latest data indicates that the seasonally adjusted non-farm payroll employment in the US decreased by 92,000 in February, marking the first negative reading since October 2025. The market had expected an increase of 59,000, which may partly reflect the reduction in healthcare employment due to White House activities. The unemployment rate for February was recorded at 4.4%, the highest since December 2025 and slightly above the market expectation of 4.3%.
Following the data release, spot gold $XAU/USD (XAUUSD.CFD)$ surged over $40 in the short term, while spot silver $XAG/USD (XAGUSD.FX)$ moved back above $83. $USD (USDindex.FX)$ At one point, it briefly fell by more than 20 points.
Regarding the earlier data, the US Bureau of Labor Statistics noted in its report that the number of new non-farm jobs in December of the previous year was revised from 48,000 to -17,000, and the figure for January was adjusted from 130,000 to 126,000. After revisions, the combined total of new jobs created in December and January was 69,000 less than before the adjustments.
This wave of layoffs has impacted the leisure and catering industry as well as the construction sector, with layoffs in construction potentially linked to adverse weather conditions during the month. Other sectors affected by layoffs include manufacturing, transportation and warehousing, and information technology.
The healthcare and social assistance sector, which accounted for the majority of overall employment growth last year, shed nearly 19,000 jobs last month. Economists had predicted that the ongoing strike by over 30,000 employees at Kaiser Permanente would affect wage expenditures within this sector.
Another report released on Friday showed that retail sales in the U.S. fell in January due to weak performance at auto dealerships, which was impacted by winter weather-related disruptions. This weakness among auto dealers constrained some business activities.
Traders are now increasing their bets that the Federal Reserve will cut interest rates at least once in 2026. The probability of a rate cut by June has risen to about 50%, up from just 35% before the employment data release.
This week’s non-farm payroll data is likely to put pressure on the Federal Reserve to consider resuming rate cuts. The current situation is entirely inconsistent with what many officials previously described as 'stabilizing.'
San Francisco Fed President Mary Daly noted in a recent interview that while this report cannot be ignored, it represents only a single month’s data, which is not decisive. Certain details within the February employment report make it difficult to interpret, and given the current instability in the labor market, an immediate rate hike appears unlikely.
Lindsay Rosner, Head of Multi-Asset Fixed Income at Goldman Sachs, stated: "Signs of a weakening labor market remind the Federal Reserve that delaying rate cuts could come at a cost, although short-term policy remains influenced by ongoing conflicts in the Middle East. Developments in Iran and their potential impact on inflation have, to some extent, overshadowed the employment situation in the United States, making the path toward potential policy normalization less clear. We expect the Federal Reserve will eventually complete the remaining two 'normalization rate cuts' to bring interest rates back to neutral levels, but given the current uncertainties, the exact timing is difficult to determine."
Previously, the labor market experienced the worst year for hiring in a non-recessionary period in decades, with an average monthly job gain of only 15,000 positions. Although there was a surge in employment growth earlier this year and initial unemployment claims remained stable at a low level, companies may have begun implementing a series of previously announced layoff plans. Additionally, recent trends in productivity improvements indicate that spending on artificial intelligence has enabled some firms to maintain operations with leaner staffing.
These figures could refocus the Fed's attention on the labor market as it assesses how long to maintain stable interest rates. Prior to this, policymakers had been more focused on inflation—even before the US-Iran war triggered investor concerns about price pressures.
Notably, the timing of this report is extremely unfavorable politically for the White House, which has yet to comment on these figures. U.S. President Trump now faces a deteriorating labor market while also grappling with persistent inflation concerns, all against the backdrop of rising oil and gas prices due to the conflict with Iran.
In the past, Trump dismissed weak economic signals and maintained that the U.S. economy remained robust under his leadership. However, even one of his most cherished indicators—the stock market—has shown considerable volatility this week.
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