The US economy unexpectedly shed jobs in February and the unemployment rate increased to 4.4 per cent, potentially hinting at a deterioration in labour market conditions that could put the Federal Reserve in a difficult spot amid rising oil prices.
The decline in non-farm payrolls reported by the Labour Department in its closely watched employment report yesterday was the sixth since January 2025 and the second largest.
The labour market stumbled in 2025 amid what economists said was uncertainty stemming from President Donald Trump’s sweeping tariffs.
Economists saw a downside risk to the labour market from a prolonged war in the Middle East, which is driving up oil prices and causing stock market volatility.
Despite Trump’s emphasis on restoring domestic manufacturing jobs through measures like import tariffs, factory employment has now fallen in all but one month since his return to the White House.
“Today’s numbers may have put the Fed between a rock and a hard place,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
“Significant weakening in the labour market would support a rate cut, but given the risk that higher-for-longer oil prices could trigger another inflation surge, the Fed may feel compelled to remain on the sidelines.”
Non-farm payrolls decreased by 92,000 jobs last month after a downwardly revised 126,000 increase in January, the Labour Department’s Bureau of Labour Statistics said.
Economists polled by Reuters had forecast payrolls advancing by 59,000 jobs after increasing by a previously reported 130,000 in January.
Estimates ranged from a loss of 9,000 jobs to an increase of 125,000 positions.
Economists said jobs gains in January had been boosted by an update of the birth-and-death model, which the BLS uses to estimate how many jobs were gained or lost because of companies opening or closing in a given month.
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