On the February Jobs Report

The large contraction of 92,000 payrolls is corroborated by a drop of 185,000 in “household survey” employment. But the two BLS data series together are starkly and strongly contradicted not only by consensus estimates for 60,000 payrolls but also by a wide range of contemporaneous labor market indicators. Weather played some role, but doesn’t explain the contradiction. Seasonal adjustments point in the right direction, but they are always large. Taking payrolls at face value, we now have a perfect series since May of alternating months of gains and losses. This is very unusual – typically the first month of payroll contraction signals a consistent downturn and a recession. This will help the FOMC in two weeks to not make a stupid policy error out of the false belief that a supply shock in energy is inflationary. One rate cut for 2026 has been taken out of the curve since the attack on Iran, and this jobs report builds back a third of a cut.