NEW YORK, March 6 (Reuters) – US nonfarm payrolls unexpectedly dropped last month, amplifying concerns about the health of the economy heading into the US-Israel conflict with Iran.
Nonfarm payrolls dropped by 92,000 jobs in February. Economists polled by Reuters had forecast payrolls adding 59,000 jobs. The unemployment rate was 4.4%, compared with expectations of 4.3%.
MARKET REACTION:
STOCKS: U.S. stocks fell at the open. The Dow Jones Industrial Average was off 1.9%. The S&P 500 and Nasdaq were down 1.6%.
BONDS: U.S. Treasury yields fell immediately after the payrolls report but then bounced back. The benchmark U.S. 10-year note was last 4.18%.
FOREX: The dollar index was flat at 99.1.
COMMENTS:
KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH
“This means that the economy is in flux. We know that big layoffs happened. There were a whole lot of people being kept on the books, being employed that may not have been necessary, but because of the time of COVID where we couldn’t find employees, a lot of people were kept on.
“Methods that we’re using to gauge the economy aren’t necessarily living up to being able to tell us important things. … The higher job cuts and the lower labor participation rate give the Fed cover to lower rates.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“That was a big swing and a miss for the payrolls number.
“You can’t sugarcoat this report. A negative payrolls number combined with a big jump in oil prices will have traders worrying about stagflation risks. Does the Fed cut to help the labor market or does it hold – or threaten a hike – to tamp down inflation expectations? It’s stuck between a rock and a hard place.”
MOLLY BROOKS, US RATES STRATEGIST, TD SECURITIES, NEW YORK:
“It was largely a weak report if you look across the board. We did expect some kind of negative impact from the healthcare strikes last month, but it seems that weakness is across the board.
“From a Fed perspective, they’re going to need more than this one report. The labor market has been holding up pretty well up until this specific report, so they’re not going to be overreacting to just one data print. This doesn’t really put the March meeting in play in our opinion, especially with the concerns around inflation spiking and potentially the pass-through from the oil spikes that we’ve seen over the last week. All of that combined, this isn’t enough for the Fed to go. They’ll still remain in wait-and-see mode.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:
“These numbers are a negative surprise, and I must say they sort of negate the idea that the labor market is stabilizing. The big question now for the labor market is, is AI really beginning to eliminate jobs and creating a weaker job environment? We’re noticing also that the missing-in-action immigrants are beginning to show up in this particular report.
“Unless this is an aberration, this is a big warning sign to the markets that the labor market may still be in big trouble and the weak payrolls number and hot wage growth points to stagflation.
“If it’s not an aberration and it continues for another month or two, then a rate cut which suddenly had fallen off the radar is now back on the radar.”
DAVID REES, HEAD OF GLOBAL ECONOMICS, SCHRODERS, LONDON:
“The large downside miss in non-farm payrolls will give the doves at the Fed something to talk about. But at least part of the downside surprise was due to strike action in the healthcare sector that ought to reverse. Beyond that, while the employment report was soft, we doubt it will be long before continued robust growth in the US economy will translate into more sustained demand for labor.
“It remains to be seen if presumptive Fed Chair, Kevin Warsh, will deviate from his view that the deployment of AI will deliver a sizeable boost to US productivity and make space for lower interest rates. But any recovery in hiring, along with the inflationary risks from events in the Middle East, would weaken the near-term case for rate cuts.”
(Reporting by Chuck Mikolajczak, Karen Brettell, Stephen Culp, Rashika Singh, P. Avinash; editing by Colin Barr)
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