A just okay employment report not good enough

The trading week is nearing its end. It hasn’t been a good week for the major indices nor has it been a good week for most stocks, including the most heavily-weighted stocks. The main catalysts for the struggles — tariff uncertainty and growth concerns — are well known, yet the price action to this point hasn’t reflected a comfort level that they are fully priced in for a market that entered the year priced for nothing but good news.

Coming out of last year, the stock market was riding high on the prospect of tax cuts and deregulation. Those initiatives haven’t fallen by the wayside, but they have not come to fruition yet in the forceful manner that they had been advertised. Instead the Trump administration’s tariff plans have taken the lead policy position, and that has thrown the market for a loop with their on gain-off again implementation, their trigger for retaliatory moves by other countries, and the pervasive sense of uncertainty regarding their impact on global economic growth.

The growth concerns have been the crux of the matter for the stock market, because the questions about economic growth prospects have inevitably invited questions about earnings growth prospects that have left investors reluctant to pay up for earnings like they willingly did throughout 2024.

The February employment report released today won’t be a salve for those concerns. It wasn’t a completely bad report, but it didn’t paint a picture of unquestionable strength either.

Nonfarm payroll growth was an okay 151,000, average hourly earnings growth was an okay 0.3%, the unemployment rate was an okay 4.1%, and the average workweek was a not-so-okay 34.1 hours. The labor force participation rate dropped and so did the employment-to-population ratio. The U-6 unemployment rate, which accounts for unemployed and underemployed workers, increased to 8.0% from 7.5%. That isn’t okay.

The key takeaway from the report is that it was no better than just okay. It won’t be enough to silence the growth concerns that have echoed in recent weeks through other data releases. 

The 2-yr note yield is down six basis points to 3.91% and the 10-yr note yield is down seven basis points to 4.22%.

 Notable headlines from the February Employment Situation Report:

• February nonfarm payrolls increased by 151,000 (Briefing.com consensus 159,000). The 3-month average for total nonfarm payrolls decreased to 200,000 from 236,000. January nonfarm payrolls revised to 125,000 from 143,000. December nonfarm payrolls revised to 323,000 from 307,000.
• February private sector payrolls increased by 140,000 (Briefing.com consensus 145,000). January private sector payrolls revised to 81,000 from 111,000. December private sector payrolls revised to 287,000 from 273,000.
• February unemployment rate was 4.1% (Briefing.com consensus 4.0%), versus 4.0% in January. Persons unemployed for 27 weeks or more accounted for 20.9% of the unemployed versus 21.1% in January. The U6 unemployment rate, which accounts for unemployed and underemployed workers, increased to 8.0% from 7.5%.
• February average hourly earnings were up 0.3% (Briefing.com consensus 0.3%) versus a downwardly revised 0.4% (from 0.5%) in January. Over the last 12 months, average hourly earnings have risen 4.0%, versus 3.9% for the 12 months ending in January.
• The average workweek in February was 34.1 hours (Briefing.com consensus 34.2), versus 34.1 hours in January. Manufacturing workweek was unchanged at 40.1 hours. Factory overtime increased 0.1 hour to 2.9 hours.
• The labor force participation rate decreased to 62.4% from 62.6%.
• The employment-population ratio decreased to 59.9% from 60.1%.

The employment report has overshadowed the good earnings results (and responses) from Broadcom (AVGO) and Gap (GAP), and it is meshing today with some weaker-than-expected trade data out of China.

Another item that has perhaps not been overshadowed by the employment data is Treasury Secretary’s clarification in a CNBC interview this morning that there is no “Trump put.” Rather, he said there is a “Trump call” in the sense that the implementation of good policies will help the market go up. He also added that there will be a “detox period,” because the market and the economy have become hooked on public spending.

The notion that there isn’t a “Trump put” flies in the face of what the stock market had been relishing coming into the year. It is one more thing the stock market will have to get its mind around as it continues to contend with tariff uncertainty and growth concerns.

Currently, the S&P 500 futures are down six points and are trading 0.1% below fair value, the Nasdaq 100 futures are up 12 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are down 110 points and are trading 0.3% below fair value.

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Originally Posted March 7, 2025 – A just okay employment report not good enough