Feb. jobs report shock: 92,000 payroll losses vs. 55,000 expected gain

That headline number is a pretty, it's a shocker. It's a shocker. When I saw that number, I went, ooh, what happened here? Why? What did we miss? What did economists miss? All right, let's talk about it here. Negative 92,000. I was going to do the numbers, Julia. OK, negative 92,000. So the U.S. economy lost 92,000 non-farm payroll jobs in the month of February. That is a massive surprise compared to the 55,000 jobs that were expected to be added to the economy last month. The unemployment rate goes up by one tenth of one percent to 4.4 percent. That's up from 4.3 percent the prior month. Average hourly earnings up four tenths of one percent month on month. 3.8 percent over last year. Both of those beat forecasts by one tenth of one percent. But the headline here is the headline. 92,000 non-farm payroll jobs taken out of the economy in February. A massive surprise relative to the 55,000 that we were expecting to add last month's job gains revised to 126,000. So basically unchanged there. So we're now what's my math here, Julie? We're up 30,000 jobs roughly for the year, which is right on pace with the number of jobs we added on average in 2025. That headline number is a pretty it's a shocker. It's a shock. It's a shocker. The biggest negative number I can remember, I think, since the pandemic. Yeah, it is interesting that you have that average hourly earnings number ticking up a little bit. 0.4 percent was the game there. I mean, if all you're watching is that unemployment rate, it going up a tenth percent to 4.4 percent is not necessarily a good news. Lauren, I'll go to you first. Just initial reactions on the numbers. And I think just a surprise that we all kind of couldn't believe down almost 100,000 jobs. Yeah, I hope my microphone was off because when I saw that number, I went, oh, look, the market leading up to this number today was really hoping that this was going to be a nothing burger. And I think anticipating that, whether a little weak or a little strong, that's what it would be. This is this is a challenging figure. And with a market that's been digesting risks related to stagflation, higher energy prices and inflation risk related to the war in Iran, certainly concerns about where the labor market might be going with respect to A.I. and the economic cycle. This is only going to reinforce those positions. And I see the 10 year yield already falling, suggesting to me that the concern that actually the economy is on weaker footing than we all thought just a few minutes ago. Yeah. Is is the price action of the day? I'm also struck by the fact that I don't think anybody had a had a estimate even near this low. I think I saw thirty five thousand was one of the lower end I saw. So, you know, when you get a number like this, how do you know what happened here? Why? What what do we miss? What did economists miss? What what do we think is was not accounted for? Yeah, part of it, I think you have to dig into the details. Certainly when you think about construction, for example, whether it's going to be a factor there. We did have some snowstorms that would weigh on things like residential as well as non-residential construction. I say non-residential because that's where you're really seeing a lot of the A.I. activity, if you will. On top of that, one thing we've been highlighting a lot and I think something that needs to become more appreciated moving forward is when you think about demographics in the US, retirements are a big story. We had record retirements last year in twenty twenty five to two million workers. When you have workers retire, that subtracts from payrolls. So if you don't have that backfill hiring, that means you're going to start to see these numbers in terms of the payroll ticked down. I just want to give some of the details here. We were talking about health care before. There was a big Kaiser strike. Kaiser Permanente had a big strike and that was expected to have an effect. So here's the effect that we had. Health care employment was down by twenty eight thousand. Physicians offices down thirty seven thousand. And that was where the strike activity seemed to be concentrated. Hospitals added twelve thousand jobs. So, you know, that's something where obviously the strike is. Well, I don't know about obviously, but the strike activity might not last. Yeah. Yeah. Right. So we'll see if there if that lasts another month. Employment and information was down by eleven thousand. It's off by five thousand jobs by on average over the past year. Federal government employment was down by ten thousand. So those were some of the places where we saw declines. Transportation and warehousing was down as well. So, you know, there were a number of areas where you saw this decline. But the real pivot was that health care, which had been propping everything up, did not. Well, I think and coming back to, let's say, like the overall architecture of the labor market and getting a handle on it, Michael, and you're not ahead of the support, you guys noted that this incorporates new annual adjustments to the household survey. Also, it made me think about where are you and your team at in terms of trying to guesstimate or, you know, estimate what that kind of break even level of employment gain is in the economy? How much has that come down? How much of these adjustments impact that? Because, again, my second thought after seeing the headline numbers that if you put January, February side by side, we're right back at that 15000 job number we saw last year. Is that what you're thinking about for, you know, the steady state employment number or is that even a little below that? That's about where we thought it would be for 2026. In 2025, we thought it was around 40000 jobs per month to hold that unemployment rate steady. You know, following the QCW benchmark revisions for payrolls, that that brought it down a little bit for us. So moving forward here in 2026, we do think it's close to flat to around 20000 per month. And that factors in, again, the pace of retirement staying quite strong, as well as immigration, which has slowed notably. So without those two supply side factors really contributing to job growth, you have to get used to a new normal, normal where you're going to see very little job creation. And that's not to say that there's not hiring underneath the surface. I think it's a misnomer to say there's no hiring. So, OK, so how do you figure out what's demand and what's supply? Lauren, when you when you look at these numbers, I mean, not just this number, but in aggregate and what we might see the rest of the year. Yeah, so I think the way that we think about this question is really to try and separate what might be cyclical factors related to, you know, how is economic growth doing right now, which, you know, situation in Iran still unfolding. A lot of the leading indicators were suggesting that actually the economic cycle was doing very well, if not picking back up. The Chicago Business Barometer for February just in the last couple of days really showing actually a positive impulse for hiring and separate those from the structural issues, changes in immigration policy, disruptions related to AI. These are really difficult things to estimate and to parse out. I think the anthropic report that we all probably took a peek through this morning is a good example of how even data providers and economists are trying to adapt their models for these changes in supply and demand. So the answer to your question is we try to reset our expectations the way Michael so elegantly putting out around what a good job number really looks like. I think even with lower expectations around the breakeven, even job rate, this is a disappointing number, especially with the unemployment rate going up.