February NFP – A Mixed Report

Employers added more workers in February than projected but wages unexpectedly declined, dashing hopes that reduced slack in the labor market was starting to benefit all Americans.

The 242,000 gain followed a 172,000 rise in January that was larger than previously estimated, a Labor Department report showed Friday. The jobless rate held at 4.9 percent as people entered the labor force and found work. Average hourly earnings dropped, the first monthly decline in more than a year.

A job market in good health will reinforce job security and encourage Americans to spend, buffering the U.S. from the ill-effects of global economic weakness. While employment is robust, and will play a role in deciding the race for the White House, bigger wage gains are needed help move inflation closer to the Federal Reserve’s goal.

“Overall employment growth remains strong despite the global headwinds,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd in Valhalla, New York, said before the report. “There’s not a lot of slack left in the job market.”

The median forecast in a Bloomberg survey called for a 195,000 advance. Estimates of 92 economists ranged from gains of 70,000 to 245,000. January was initially reported as a 151,000 increase. Revisions to prior reports added a total of 30,000 jobs to payrolls in the previous two months.

The unemployment rate, which is derived from a separate Labor Department survey of households, was projected to hold at an eight-year low of 4.9 percent, according to the survey median.


The labor market is coming off its best two years for job growth since 1998-1999. While leading Democratic presidential candidate Hillary Clinton can point to economic progress under her party’s leadership, Republican front-runner Donald Trump may steer voters to focus on limited wage growth and companies moving operations overseas because of high corporate tax rates.

Average hourly earnings dropped by 0.1 percent from the prior month, the first decline since December 2014 the Labor Department’s figures showed. Worker pay increased 2.2 percent over the 12 months ended in February, less than the 2.5 percent forecast in the Bloomberg survey.

Wage growth has been hovering just above 2 percent year-over-year on average since the current expansion began in mid-2009.

Retailers posted strong employment gains for a second month, along with the health care industry. Payrolls at retailers climbed about 55,000 in February after a 62,000 advance a month earlier, while health care employment increased 57,400.

Manufacturing, Construction

Payrolls at factories declined by 16,000 after a 23,000 gain and construction companies added 19,000 workers.
The average work week for all workers declined to 34.4 hours from 34.6 hours.

The participation rate, which shows the share of working-age people in the labor force, jumped to 62.9 percent, the highest since January 2015.

Fed policy makers, who lifted interest rates in December for the first time in almost a decade, have said they will make further moves gradually. They meet later this month. Sustained wage growth will help lift inflation closer to the central bank’s goal.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell