The U.S. job market shed 92,000 jobs in February, a sharp and unexpected setback for the economy after economists had forecast job growth. 

The unemployment rate ticked up to 4.4% last month from 4.3% in January.

By the numbers

Economists polled by FactSet had predicted a payroll gain of 60,000 last month.

February marks the third time in the last five months that the job market has shown job losses. U.S. market futures are declining on the jobs report’s surprise miss, along with another big spike in crude oil prices amid the widening war in Iran.

A drop in hiring in the health care sector, which has recently been a source of employment gains, dragged down job growth in February. That sector shed 28,000 jobs, which the Labor Department attributed to recent strike activity. A nurses’ strike in California ended late last month.

Some analysts noted that strikes and recent winter storms may have distorted the data, making it appear weaker than it actually is.

“Just as the January jobs report overstated any emerging strength in the labor market, the February employment data give a false impression of deteriorating labor market conditions,” Nancy Vanden Houten, lead economist at Oxford Economics, said in an email on Friday.

Payroll gains were unexpectedly strong in January, soaring well above economists’ expectations. On Friday, the Labor Department revised job growth for that month down by 4,000 and for December by 65,000.

Even if the job market is stronger than it appears, experts said Friday that the February employment data is injecting a degree of uncertainty into the U.S. economy.

“Recent labor market data had been pointing to resilience, but today’s sharply weaker reading raises the risk that a different picture could be in play,” said Seema Shah, chief global strategist at Principal Asset Management, in an email. “Markets are being tugged in opposing directions, and this jobs report adds yet another layer of uncertainty to an already noisy backdrop.”

As of late, the labor market has been marked by a stretch of weak hiring. The pace of job turnover hit a nine-year low in January, at 5.8%, a recent ADP report found, as many workers cling to their jobs. The lackluster hiring was on full display last year, when employers added just 181,000 jobs, the lowest since the pandemic year of 2020. 

What experts are saying

The February jobs decline poses a sticky situation for the Federal Reserve as it seeks to bolster employment while keeping inflation at bay, experts say. Cutting rates could help kick-start the labor market, but the Fed would also risk fueling inflation, which has become a central concern as the war in Iran drives up global energy prices.

Fed officials will be grappling with whether February’s data is a blip or if it reflects a longer-term trend, experts noted.

“Today’s data show that the labor market has averaged essentially zero net job creation over the past six months,” Cory Stahle, an economist for Indeed Hiring Lab, said in an email. “The key question now is whether February was a temporary setback or the start of a more concerning trend.”

The Fed’s next rate decision will be announced on March 18.

“Today’s numbers may have put the Fed between a rock and a hard place,” Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said in an email. “Significant weakening in the labor market would support a rate cut, but given the risk that higher-for-longer oil prices could trigger another inflation surge, the Fed may feel compelled remain on the sidelines.”

Inflation fears, fueled by rising oil prices due to the widening Iran war, are already rattling parts of the U.S. economy such as the housing market, where mortgage rates recently edged up to 6%. The price for Brent oil, the international benchmark, hit $90 per barrel on Friday as the conflict escalated.