February Nonfarm Payrolls Unexpectedly Fall, Unemployment Rate Ticks Higher

11:09 AM EST, 03/06/2026 (MT Newswires) -- US employment unexpectedly declined in February and the jobless rate ticked higher, possibly bringing labor market conditions back in focus at a time when the US-Iran war threatens to fuel inflation.

Nonfarm payrolls fell by 92,000 last month -- the biggest drop since October -- following a downwardly revised gain of 126,000 in January, the Bureau of Labor Statistics said Friday. The consensus was for a 55,000 increase in February, according to a Bloomberg-compiled survey.

The unemployment rate rose to 4.4%, while Wall Street expected an unchanged print at 4.3%.

"The February employment report will change the narrative in the markets of a resilient and possibly improving US labor market, highlighting the two-sided risks the (Federal Reserve) faces as we digest the economic impacts from the war in Iran," BMO Chief US Economist Scott Anderson said in a note.

As of late, Fed officials' focus seemed to have shifted back to price stability from the labor market, but Anderson said any optimism over the latter faded after the latest NFP report.

"Fed funds futures are pricing in a higher probability of two Fed rate cuts this year," he said.

Oil prices have spiked in the aftermath of the US-Israel war with Iran that is now into its seventh day.

The jump in gasoline prices could add as much as 30 basis points to inflation this year, Oxford Economics Chief US Economist Michael Pearce said in remarks emailed to MT Newswires.

Private payrolls contracted by 86,000, driven by widespread job losses across industries, the BLS reported. The service industry shed 61,000 jobs last month, while employment in the goods-producing sector fell by 25,000.

Health care lost jobs due to a strike among physicians, while sectors like construction and leisure and hospitality logged declines due to weather conditions, Jefferies Chief US Economist Thomas Simons said in a note.

Earlier this week, the Fed's Beige Book showed that most districts saw no change in hiring in recent weeks amid rising non-labor input costs, soft demand or economic uncertainty. Separately, ADP (ADP) data indicated that private sector employment increased more than expected in February.

Markets continue to widely expect the Fed to hold interest rates steady at 3.50% to 3.75% later this month, according to the CME FedWatch tool.

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