Strong Job Numbers Might Mean a Longer Wait for Rate Cuts

The February job numbers that came out today and were stronger than expected. As MarketWatch reported on Thursday, the expected number of new jobs was 198,000, with unemployment to stay at 3.7%.

Instead, the number of new nonfarm jobs was at 275,000, and yet unemployment rose to 3.9% with the number of unemployment growing by 334,000 to 6.5 million. A year before, the jobless rate was 3.6% and the number of unemployed was 6.0 million.

There’s a fundamental mistake to assume that job creation means no other jobs are allowed to be ended. Reuters quoted figures from outplacement firm Challenger, Gray & Christmas that there were 82,307 job cuts in January 2024 and another 84,638 in February. That was the highest number in February since 2009. A significant number came from the technology sector, TechCrunch reported.

As the Bureau of Labor Statistics explains, the unemployment numbers are determined though statistical surveys. “A sample is not a total count, and the survey may not produce the same results that would be obtained from interviewing the entire population. But the chances are 90 out of 100 that the monthly estimate of unemployment from the sample is within about 300,000 of the figure obtainable from a total census. Relative to total unemployment—which ranged between about 7 and 15 million over the past decade—the possible error resulting from sampling is not large enough to distort the total unemployment picture.” So, jobs are likely getting cut somewhere.

“Our real-time data shows demand remains strong, yet more balanced and concentrated,” Ger Doyle, ManpowerGroup SVP and head of Experis North America, in a prepared statement. “Nurses, software developers and front-line retail workers are the three most sought after roles in the U.S. today. In the tech space, AI and machine learning engineers are seeing good growth since last year, with finance and consulting companies as some of the top employers of this specialist tech talent. More broadly, American consumers are still watching their wallets and cost-conscious retail employers like Kroger, Walmart and Amazon are the top companies hiring this month.”

“The employment report does not change the view that the FOMC will be patient in raising rates,” Nationwide Chief Economist Kathy Bostjancic noted in prepared remarks. “It still keeps on the table a start to the rate cutting process at the May FOMC meeting, but most likely Fed officials wait until at least the June policy meeting before beginning to lower rates.”

There was also a lot of concentration in the new jobs. Healthcare was up by 67,000. Government, by 52,000. Food and beverage service increased by 42,000. Social assistance, up 24,000; transportation and warehousing, 20,000; and construction, 23,000. That is 223,000, or about 83% of all the new jobs.