US DATA ANALYSIS: NFP and Retail Sales

Nonfarm Payrolls

• Overall, the report was soft and raises questions about whether the labour market has truly stabilised. After a strong jobs report in January (+126k, revised from 130k), the economy lost 92k jobs in February, far below the +59k forecast. Two-month net revisions totalled -69k, largely concentrated in December (-65k), leaving December payrolls at -17k. January job growth remained solid at 126k (initially 130k), but the revisions place the start of the year at a lower employment base, with much of January’s strength fading in the initial February reading. The March jobs report, due on 3rd April, will include further revisions to both the strong January figure and the weak February data.
• Regarding job losses this month, healthcare employment fell by 28k, reflecting strike activity following a 77k increase in January. Employment in information and the federal government continued to trend down, with information employment -11k and federal government employment -10k. Social assistance rose by +9k, while transportation fell by -11k. Little change was reported across other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; retail trade; financial activities; professional and business services; leisure and hospitality; and other services.
• Ahead of the data, ING highlighted: "A few are warning of a softer, possibly negative number based on the very cold weather in late January and early February. If so, the dollar could get hit briefly, but losses might not endure given the Middle East risk."
• The unemployment rate rose to 4.4% from 4.3%, against expectations for another 4.3% reading, bringing it in line with the Federal Reserve’s 2026 median projection, which is set to be updated on 18th March.
• Meanwhile, wages came in one-tenth higher than expected at 0.4% M/M and 3.8% Y/Y. For the Fed, the report may prompt Waller to vote for another 25bps cut in March - he said before the data that if January’s strength unwound in February he might support another cut.
• Markets are still not pricing rate cuts until September amid uncertainty around the situation in the Middle East and its economic impact, and the Fed typically takes a wait-and-see approach during periods of uncertainty. Markets now price in about 44bps of easing in 2026 versus 38bps before the data. This fully prices in one rate cut, with a 76% probability of a second.

Retail Sales: 

• Retail sales fell 0.2% in January (prev. 0.0%), albeit not as deep as the expected decline of 0.3%, while ex-gas/autos rose 0.3% (exp. 0.0%, prev. 0.1%, rev. from 0%) and ex-autos was unchanged at 0.0%, in line with expectations.
• Retail control group rose 0.3%, slightly above Wall St. consensus of 0.2%, with the prior revised to 0.0% from -0.1%.
• Spending fell, as consumer confidence was hit, highlighted within the report as foods services & drinking places, declined for the second consecutive month, while clothing & clothing accessories store spend also pulled back further.
• Potentially further weighing on the consumer were harsh cold weather conditions affecting some of the country in late Jan.