Unemployment Rate Rises to 4.4% as Economy Loses 92,000 Jobs

The U.S. unemployment rate increased to 4.4% in February, up from 4.3% the month before, signaling a softening in the domestic labor market.

The weaker-than-expected report from the Bureau of Labor Statistics released Friday showed that nonfarm payrolls decreased by 92,000.

This follows significant downward revisions to previous months: January’s surprise gain was trimmed to 126,000, while December's modest growth was erased entirely, falling from a gain of 48,000 to a loss of 17,000.

The segments of the job market that saw major losses in February included health care (-28,000)—which was walloped by a major nurses strike in California— as well as information (-11,000) and federal government (-10,000). Notably, the health care sector was January's primary hiring engine.

Since reaching a peak in October 2024, federal government employment is down by 330,000, or 11%.

Meanwhile, manufacturing and construction shed 12,000 and 11,000 jobs, respectively, as mining and logging lost 2,000 payrolls.

"Overall, the first two months of the year suggest we shouldn’t overreact to either January’s highs or this February’s lows," says Realtor.com® senior economist Jake Krimmel. "It does appear the 'low-hire, low-fire' job market is still with us, and the initial numbers are getting a bit messier."

What it means for the Fed and housing

Krimmel stresses that despite this uptick in unemployment, the Federal Reserve is likely to maintain its pause on interest rate cuts until inflation starts cooling.

With core PCE, the Fed’s preferred inflation gauge, stuck at 3%, policymakers on the Federal Open Market Committee (FOMC) appear to have turned their focus to the price-stability side of its dual mandate. This stance is expected to hold firm through the release of the next Consumer Price Index (CPI) report on March 11.

"New voices on the committee, such as Beth Hammack, have already signaled the need for an extended pause to ensure inflation doesn't become entrenched," says Krimmel.  

Markets are currently pricing in a 95% chance that the Fed stays put during the next FOMC meeting this month, meaning borrowers should not expect any near-term mortgage interest rate relief from the central bank.

On the housing side, Krimmel cautions against excessively "scoreboard watching" weekly mortgage rate volatility.

"It was tempting to celebrate a 5-handle last week and equally tempting to lament this week’s 20-basis-point surge in 10-year yields as a sign that lower mortgage rates were short-lived," notes the economist. "The relevant benchmark for the spring season is the year-over-year changes, not a February to March comparison. 

At 6%, mortgage rates remain significantly lower than the 6.63% seen this time last year, representing a major boost in real purchasing power for buyers now entering the market. In more good news, February's data shows that pending sales hit their highest annual gain since 2024 and new for-sale listings are climbing.

"As long as the labor market continues to settle, the combination of stable employment and a 2.1% dip in median list prices means the conditions for a smooth takeoff in the housing market are forming nicely," concludes Krimmel.