The U.S. labor market showed unexpected weakness in February as employers cut jobs and the unemployment rate moved higher, according to new government data.

The report from the Bureau of Labor Statistics showed that nonfarm payrolls declined by 92,000 during the month. Economists had expected job growth of around 50,000.

The figure also came in well below the revised January total of 126,000 new jobs.

February marked the third time in the past five months that payrolls declined, adding to concerns that hiring momentum may be slowing after several years of strong employment gains.

At the same time, the unemployment rate rose slightly to 4.4 percent.

Strike and Weather Contributed to Job Losses

Several temporary factors likely contributed to the weak jobs report.

A major strike involving employees at Kaiser Permanente played a significant role in reducing payroll totals. More than 30,000 workers in Hawaii and California were sidelined during the survey period.

Because the strike occurred during the week when the government collects employment data, the absence of those workers was reflected as a decline in jobs.

Severe winter weather also affected employment in several sectors, particularly industries sensitive to seasonal conditions.

Despite the strike’s impact, economists noted that the overall report still pointed to softer hiring trends.

Health Care Sector Shows Unexpected Decline

Health care has been the primary driver of employment growth over the past year. However, the sector reported a decline of about 28,000 jobs in February.

Other industries also experienced losses.

Manufacturing employment fell by roughly 12,000 positions even as tariffs were introduced in an effort to encourage domestic production.

The information services sector lost about 11,000 jobs, continuing a longer trend of job reductions partly linked to automation and artificial intelligence.

Transportation and warehousing employment declined by another 11,000 positions.

Construction, which added 48,000 jobs in January, fell by about 11,000 in February as harsh weather disrupted activity.

Federal government employment also declined by about 10,000 positions.

Wage Growth Remains Strong

Despite the decline in jobs, wages continued to increase at a healthy pace.

Average hourly earnings rose by 0.4 percent during the month and increased 3.8 percent compared with the same period a year earlier.

Both figures came slightly above economists’ expectations.

Rising wages can support consumer spending, which remains a key driver of economic growth.

However, strong wage growth can also create challenges for policymakers attempting to control inflation.

Federal Reserve Officials Monitoring Labor Market

Officials at the Federal Reserve are closely watching labor market developments as they consider future interest rate decisions.

Mary Daly said the report suggests that expectations of a stabilizing labor market may have been overly optimistic.

She also noted that policymakers must balance concerns about both employment and inflation.

Inflation has remained above the Federal Reserve’s long-term target, and rising oil prices related to tensions in the Middle East have added further uncertainty.

Daly cautioned against drawing strong conclusions from a single month of data, noting that employment reports can be volatile.

Long-Term Unemployment Increases

The report also showed signs of longer job searches among unemployed workers.

The average duration of unemployment rose to 25.7 weeks, the longest level recorded since late 2021.

Meanwhile, the labor force participation rate declined slightly to 62 percent, its lowest level in more than two years.

Data from the household survey, which is used to calculate the unemployment rate, showed an even weaker picture. The number of people reporting that they were working fell by about 185,000, while the number of unemployed individuals rose by more than 200,000.

Economists See Mix of Temporary and Structural Factors

Some economists believe the weak payroll figure reflects a combination of temporary disruptions and underlying labor market adjustments.

Thomas Simons, an economist at Jefferies, described the February report as a “perfect storm” of factors that weighed on employment.

Weather conditions, the health care strike, and other short-term disruptions likely contributed to the decline.

However, Simons noted that even after accounting for those factors, the report still points to slower job growth.

Policy Outlook Remains Uncertain

The labor market data arrives at a time when policymakers are weighing how quickly to reduce interest rates following earlier increases designed to combat inflation.

After the payroll report was released, traders increased expectations that the Federal Reserve could begin cutting interest rates later this year.

According to market data from CME Group, investors are now pricing in a higher probability of two interest rate cuts before the end of the year.

Still, Federal Reserve officials say they will continue evaluating incoming economic data before making major policy decisions.

With inflation risks, geopolitical tensions, and mixed economic signals all influencing the outlook, policymakers appear likely to maintain a cautious approach in the months ahead.