Data overview: New employment is lower than expected, unemployment rate unexpectedly climbed
On March 7, 2025, the U.S. Department of Labor released February non-agricultural employment data, and the key indicators are as follows:
New non-agricultural employment: 151,000, lower than the market expectation of 160,000, and the previous value was revised down from 143,000 to 125,000;
Unemployment rate: 4.1%, up 0.1 percentage point from the previous value of 4.0%, the highest since November 2024;
Average hourly wage year-on-year growth rate: 4.0%, slightly lower than the expected 4.1%, and the previous value was also revised from 4.1% to 3.9%.
Judging from the data, although new employment has rebounded from January, it is still lower than expected for two consecutive months, and the unemployment rate has unexpectedly risen, reflecting that the US job market is facing multiple pressures.
Structural factors behind the data
The suppressive effect of the government layoff plan
The Trump administration's federal agency layoff plan was launched in February, causing the number of new government jobs to drop sharply from 44,000 in the previous value to 11,000. In addition, the government's "buyout plan" (encouraging employees to resign voluntarily and compensating wages) has led to the resignation of about 75,000 people, and the scale of layoffs in the future may expand to 475,000, accounting for 20% of the total number of federal civil servants. This policy directly weakened the overall growth momentum of the job market.
The delayed impact of extreme weather
In January, the California wildfires and winter storm "Blair" disrupted economic activities. Although the weather disturbance subsided in February, some industries (such as the retail industry) were still affected, and the retail industry employment decreased by 6,000, which was in sharp contrast to the previous value of 30,000 growth.
Industry differentiation: manufacturing industry rebounds, service industry weakens
Manufacturing industry: 10,000 new jobs, reversing the negative growth in January (-5,000), mainly due to the recovery of automobile and machinery manufacturing;
Financial industry: 21,000 new jobs, benefiting from the expectation of interest rate easing;
Professional and commercial services industry: -2,000 new jobs, the decline narrowed but still sluggish.
Market reaction: The dollar weakened, and expectations for rate cuts increased
US dollar index: After the data was released, the US dollar index fell 0.7% to 103.47, falling for five consecutive days, the worst single-week performance in more than a year;
Stock market performance: The three major US stock indexes rose against the trend, with the Dow Jones, S&P 500 and Nasdaq rising 0.5%, 0.6% and 0.7% respectively. The market bet that the Federal Reserve may cut interest rates in advance to support the economy;
Treasury bond yields: The 10-year US Treasury yield rose 3 basis points to 4.32%, indicating that market concerns about inflation risks have eased.
Potential impact on Fed policy
Expectations for rate cuts strengthened
After the data was released, the CME Fedwatch tool showed that the market expected three rate cuts in 2025, with the first rate cut brought forward from July to June, with the probability rising to 52.6%29. Although Fed Chairman Powell stated that "the economic situation remains sound", he also hinted that if employment continues to weaken or inflation falls significantly, he will consider cutting interest rates9.
The dilemma of balancing inflation and employment
Although the slowdown in wage growth (4.0% year-on-year) and the decline in labor participation rate (62.4%→62.6%) have eased inflationary pressure, the U6 unemployment rate (including part-time population) has risen sharply to 8.0% (previous value 7.5%), indicating that the problem of idleness in the labor market has intensified, which may force the Fed to seek a policy balance between curbing inflation and stimulating employment.
Future Outlook: Economic Resilience Faces a Test
Short-term Risks: The continued advancement of the Trump administration's layoff plan may further suppress employment data in March and beyond. Combined with the financing pressure on enterprises in the high interest rate environment, economic growth may continue to slow down;
Long-term variables: The easing of the Russian-Ukrainian conflict and the decline in oil prices may reduce the pressure of imported inflation, providing room for the Fed to cut interest rates;
Policy Path: If the non-agricultural data continues to be weak in the future, the Fed may start a rate cut cycle in June, and the annual rate cut may exceed current market expectations.
Conclusion: The turning point of the employment market is looming, and policy adjustments are imminent
The February non-agricultural data revealed the fragility of the US economic recovery: government layoffs and external shocks weakened the momentum of employment growth, while the market's urgent expectation for rate cuts reflects a cautious attitude towards the economic outlook. In the future, we need to focus on March employment data, inflation indicators and the statements of Fed officials to verify the rhythm and strength of the policy shift. For investors, the US dollar is under pressure in the short term, gold and defensive assets may become the preferred safe haven, and the structural opportunities of US stocks may be more concentrated in technology fields such as AI.
*Disclaimer: The content of this article is for learning purposes only, does not represent the official position of VSTAR, and cannot be used as investment advice.
