US nonfarm payrolls (NFP) jumped in Feb, pressuring the Fed

The American economy continued doing well in February. In its monthly report, the Bureau of Labor Statistics (BLS) said that the economy added 275 jobs in February after creating 229k in the previous month. This means that the economy has added over 1.5 million jobs in the past six months.

The US unemployment rate rose to 3.9%, meaning that the economy is in full employment, which is defined as a period when the rate is below 5%. Wages continued rising in February, growing by 0.1% on a MoM basis and by 4.3% on a YoY basis. The participation rate remained at 62.5%.

These numbers came two days after ADP estimated that the private sector created 143k jobs in February. According to the BLS, the private NFP increased by 223k in February. A separate report by the BLS revealed that the number of job vacancies dropped in January.

The report came after Jerome Powell, the head of the Federal Reserve hinted that the bank was confident that it would start cutting rates later this year. He believes that inflation will ultimately drop to its target point of 2.0%.

Still, the strong jobs numbers mean that inflation could remain at an elevated level for a while. According to Philip’s Curve, inflation tends to rise in a tight labor market since these consumers boost their purchases.

With the jobs report done, focus now shifts to the upcoming Consumer Price Index (CPI) data. Economists believe that inflation remained at an elevated point in February. The expectation is that the headline CPI rose 2.8% in February as core CPI rose to 3.7%.

Therefore, most analysts expect that the Federal Reserve will start to cut interest rates in its June meeting. Besides, the most recent data showed that consumer confidence, factory orders, and manufacturing output has dropped. These numbers will likely not have an impact on the stock market as the S&P 500, Dow Jones, and Nasdaq 100 indices have all surged to their all-time highs.