Dive Brief:
- TThe economy unexpectedly lost 92,000 jobs last month, the Bureau of Labor Statistics reported on Friday, as fighting in the Middle East pushed oil prices to their highest level since 2022, prompting concerns of higher inflation.
- Job losses spanned the entire range of industries, from manufacturing and warehousing to transportation, health care and construction, and pushed the unemployment rate up by 0.1 percentage points to 4.4%belying the view of many Federal Reserve officials that the labor market is consolidating.
- “Hopes that the labor market was consolidating were perhaps overblown,” said San Francisco Fed President Mary Daly. “We also have an impression of above-target inflation and oil prices are rising,” he said in an interview with CNBC. “Both of our targets are risks now, and we have to watch both,” Daly said, referring to the Fed’s mandate to ensure stable prices and full employment.
Diving knowledge:
Construction lost a net 11,000 jobs month over month in February, according to an analysis of data from the Associated Builders and Contractors. Interannually, employment in the sector has grown by 42,000 jobs, 0.5% more.
Employment in nonresidential construction declined by 3,800 positions, with losses in two of the three subcategories. Civil and heavy engineering lost 6,500 jobs and non-residential specialty trade lost 1,400 jobs, while non-residential building added 4,100 jobs in February, ABC said.
Shrinking payrolls prompted interest rate futures traders to predict a faster pace of monetary policy easing on Friday.
Futures traders saw a 50.3% chance the Fed would cut the benchmark interest rate by at least a quarter point at its June policy meeting, compared with a 33.3% chance on Thursday, it said. CME Group’s FedWatch tool.
Traders apparently believe policymakers will focus more on strengthening the labor market than curbing price pressures, even though energy prices have risen since the outbreak of fighting in the Middle East and inflation has exceeded the central bank’s five-year inflation target of 2%.
Since the renewal of hostilities between Iran and the US and Israel on February 28, the average price of a gallon of regular gasoline increased by 11%according to AAA.
Brent crude futures over the same period they have soared 29%, from $73 a barrel to $94 a barrel, the highest level since November 2022.
However, a short-term increase in energy prices would probably not worsen the outlook for inflation, according to economists.
“History suggests that oil price spikes due to geopolitical shocks and temporary supply disruptions may be short-lived,” according to Goldman Sachs.
“Brent went from around $65 in early June 2025 to the low $80s when Israel and the US hit Iran’s nuclear facilities,” he added. said Goldman Sachs in a report on Tuesday. “Prices quickly retreated as the market gained confidence that actual oil supplies were unlikely to be disrupted.”
Cleveland Fed President Beth Hammack expressed no alarm over the new labor market data and echoed Daly’s favorable a wait and see approach towards a monetary policy that closely tracks both price pressures and the health of the labor market.
“American inflation is too high,” he said in a speech.
“However, the Fed is not just focused on inflation,” he said, noting that “we have a dual mandate and have to balance high inflation with the softening of the labor market that we’ve seen over the last year,” Hammack said.
“I think policy is in a good position,” he said, adding “I think policy should be on hold for quite some time as we see evidence that inflation is coming down and the labor market is stabilizing further.”
