GTHT released a research report stating that U.S. non-farm payrolls unexpectedly turned negative in February, with the unemployment rate rising to 4.4%, exceeding market expectations. However, employment data for January and February were significantly affected by technical factors, and the unemployment rate has not shown signs of sustained increase, suggesting limited impact on market sentiment and Federal Reserve policy decisions. In the short term, developments in the Iran situation and whether oil prices remain elevated are more critical factors influencing market sentiment. Key points from GTHT are as follows:
Non-Farm Payrolls: Reasons for the Unexpected Decline U.S. non-farm payrolls fell by 92,000 in February 2026, significantly below the market expectation of an increase of 55,000. From an industry perspective, employment in the education and healthcare sectors declined the most, contributing to the substantial fluctuations in non-farm payrolls over the past two months. On one hand, strikes involving over 30,000 employees at Kaiser Permanente in February negatively impacted employment figures. On the other hand, adjustments to the birth-death model may have amplified the volatility in non-farm payrolls for January and February. However, other employment indicators do not suggest a significant weakening of the U.S. labor market. Excluding technical and strike-related factors, the actual employment situation may not be as weak as indicated by the February non-farm payroll data.
Unemployment Rate: Higher Than Expected The U.S. unemployment rate rose to 4.4% in February, exceeding the market expectation of 4.3%. This increase occurred alongside a decline in the labor force participation rate, which fell to 62%, notably below the market expectation of 62.5%. Temporary unemployment and re-entrants into the labor force were the primary drivers behind the rise in the unemployment rate. Nevertheless, the current unemployment rate of 4.4% remains within the Federal Reserve's projected range and has not yet shown a sustained upward trend. Additionally, the U6 unemployment rate decreased from 8.0% in January to 7.9% in February, potentially indicating relative improvement in employment conditions for marginalized groups in the U.S.
Oil Prices May Be the Short-Term Market Focus Overall, the February U.S. employment data did not cause significant market concern. Compared to non-farm payroll figures, developments in the Iran situation and whether oil prices remain elevated are likely more influential factors for market sentiment. If tensions with Iran escalate, leading to persistently high oil prices and a notable rebound in inflation expectations, this could potentially constrain the Federal Reserve's pace of interest rate cuts.
Risk Warning: Escalating tensions with Iran may keep oil prices elevated for an extended period.
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