Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Another strong beat in payroll growth in February masked other signs of softening in the jobs market. Nonfarm payrolls surpassed consensus expectations for a 200K increase by rising 275K last month, with gains broadly-based across industries. Even with some meaningful downward revisions to the prior two months, the three-month average pace of job growth was little changed at a solid 265K. However, the unemployment rate rose to just over a two-year high of 3.9%. The increase was driven by a jump in unemployment and decline in the household measure of employment. While we put more weight on the payroll measure of employment, there were other cautionary signs about the labor markets’ strength going forward. Continued declines in temporary help workers, a rise in permanent job losers and a shift toward part-time work all point to deteriorating demand for workers and slower payroll gains ahead. A gradual cooling in the labor market offers additional evidence that inflation also will continue to slow in the months ahead and brings the long-awaited FOMC rate cuts into sharper focus.