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Unemployment inched up and jobs fell in February, but economists don't think it will be enough to move the Fed to cut rates with the ongoing war against Iran.
The U.S. Bureau of Labor Statistics (BLS) reported Friday that the nation's unemployment rate rose from 4.3% in January to 4.4% in February, while non-farm jobs fell by 92,000 after seasonal adjustments.
When February's losses were combined with downward revisions for December and January, the economy gained only 17,000 jobs over the last three months.
"February's employment numbers came in much lower than anticipated, as businesses continued a lower hiring trend," Curt Long, chief economist for America's Credit Unions, said.
The health care sector, which has been the primary source of job growth over the last two years, lost jobs due to a physicians' strike, according to the BLS.
While February's 4.4% unemployment rate was slightly higher than January's, it returned to its level in December, which Long said might affect rate decisions when the Federal Open Market Committee (FOMC) next meets March 17-18.
"With the unemployment rate remaining stable, the Federal Reserve may shift its focus toward inflation concerns as oil prices rise," Long said.
Mike Fratantoni, chief economist for the Mortgage Bankers Association, also pointed to the overall weak job growth that had got much of its support from health care.
"In February, with job losses in health care due to labor strikes, there was nothing left to support aggregate job growth, and the total declined by 92,000," Fratantoni said.
He said unemployment rose as more workers re-entered the labor market but were unable to find work immediately. Wage growth increased slightly to 3.8% over the past year.
"The job market is softening and inflation is expected to increase due to a spike in oil prices resulting from the war in Iran," Fratantoni said. "Although this month's job numbers were weaker than expected, we do not expect the FOMC to cut rates any time soon given the heightened inflation risk. MBA is sticking to its forecast that mortgage rates will remain in a range of 6% to 6.5% over the forecast horizon. A softer job market will be a headwind for housing demand as we enter the spring home buying season."
Its latest monthly forecast issued Feb. 17 expected the rate for 30-year fixed rate mortgages to fall from 6.2% at the end of March to 6.1% through the rest of the year.
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
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