US jobs report ‘all over the place’ as unemployment ticks up

The US economy presented a muddled picture in February, as the economy added 275,000 jobs, above expectations of 200,000, while the country’s unemployment rate increased by 0.2 percentage points to 3.9 per cent.

Wage inflation came in at 4.3 per cent on a yearly basis, below market expectations and January’s figure of 4.4 per cent.

Markets saw the report as slightly favouring chances of a May rate cut from the Federal Reserve, with the odds of one happening increasing from 24.9 per cent to 30.9 per cent following the report, according to data from CME Group.

Seema Shah, chief global strategist at Principal Asset Management, described the report as “all over the place”, with more jobs added than expected, but a higher unemployment rate, as well as wage inflation falling while hours worked rose.

Shah also pointed to the revisions to January’s numbers, which were substantially revised down, from 353,000 to just 229,000.

“Revisions are creating disruptive crosscurrents for market sentiment and appreciation for the underlying strength of the labour market,” she said.

Charles Hepworth, investment director at GAM Investments, agreed, describing the report as “muddying the picture”.

“If we are genuinely seeing the unemployment rate having troughed and moving higher and wage growth slowing, then it obviously pushes the door for rate cuts open wider,” he said. “This was a softer than expected jobs report and raises the likelihood of the Federal Reserve cutting rates in June.”

“If the economy can continue to add jobs but without triggering a resurgence in wage growth, the Fed will achieve its soft landing,” added Shah. “The Fed does, however, still need to tread cautiously and so today’s report doesn’t change our view that the first hike will come around mid-year, no earlier.”