Jobs report and Powell's words mask that worse numbers are likely coming soon

The monthly jobs report always get headlines and notice in both the financial and economic media. But this was especially true for the report for February that dropped on Friday, as there had been significant turmoil in Washington DC over the last month with mass firings announced at numerous federal agencies by the unelected (and unauthorized) Elon Musk and his broccoli-haired dweeby acolytes.

So here came the report on Friday and it ended up...mostly business as usual for now.

U.S. employers added 151,000 jobs in February, while the unemployment rate inched up to 4.1% from 4% in January.

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— NPR (@npr.org) March 7, 2025 at 8:39 AM

That seems odd, given all the stories we've been reading. Also, federal government jobs were only down 10,000 and not 100,000+. So what gives?

Brace yourselves, this is nothing yet, much is still coming: “federal government layoffs won’t show up in the government’s February monthly jobs report because they took place outside of the survey week.”

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— Amerik (@amerik.bsky.social) March 7, 2025 at 7:18 AM

Ahh, that explains it. You'll have to wait untilnext week to see the larger drop in federal jobs...if the numbers are legit, of course.

What saved the stock market from having yet another down day were statements later on Friday from Federal Reserve Chair Jerome Powell. Powell said that the Fed would....wait and see, I guess?

"We do not need to be in a hurry and are well-positioned to wait for greater clarity."

The central bank leader added in a Q&A portion following his speech that "the cost of being cautious is very, very low. The economy is fine. It doesn't need us to do anything, really, so we can wait and we should wait."…..

"The new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation," Powell said. "It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy."

In other words, a one-time spike in prices due to tariffs alone would not be appropriate for the central bank to react to, according to Powell, since restrictive monetary policy would reduce employment and activity at a time when it would not be needed....

Still, Powell cautioned that most economists are forecasting some inflationary effects from tariffs that will likely hit exporters, importers, retailers, and, to some extent, even consumers. If those effects are significant enough to impact longer-term inflation expectations within the context of the current environment, "that would matter," Powell said.

That doesn't seem like anything that should give you great confidence that things will stay as good as they were in 2024, or that interest rates will be going down more any time in the future. But I guess Powell and Wall Street traders aren't going to admit that reality until the DOGE job losses actually hit the jobs reports and unemployment claim numbers over the next month, and we see another month of disappointing consumer spending.

While the February jobs report seems relatively benign, there was one part in the full official release that seems to be getting ignored.

The number of people employed part time for economic reasons increased by 460,000 to 4.9 million in February. These individuals would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs.

The number of people not in the labor force who currently want a job increased by 414,000 to 5.9 million in February. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.

The number of people whose hours were limited due to economic reasons were at their highest non-COVID levels since 2018, and the number of people who have held themselves out of the labor force despite wanting work is at its highest non-COVID level since 2016.

That seems like a sizable one-month increase for both of these categories, and it was a big reason why the U-6 unemployment rate jumped from 7.5% to 8.0% in February.The U-6 increase could be a weird one-month thing in a cold month, so we can see what next month's report says before panicking. But it could be a clear sign of trouble where one large-scale event of job loss and/or drop in economic activity ends any chance of growth, and tips us over into recession (HI, DOGE!) . And once that cycle starts, it takes a lot more effort to reverse the momentum of job and demand losses.