Guotai Haitong: Why Did Non-Farm Payrolls Turn Significantly Negative?

CNBC Finance APP has learned that Guotai Haitong released a research report stating that in February, the U.S. added a significant number of non-farm jobs, turning negative, with the unemployment rate unexpectedly rising to 4.4%. However, the non-farm data for January and February was heavily affected by technical factors, and there are no signs of a sustained increase in the unemployment rate, so the impact on the market and Federal Reserve decisions may be relatively limited. In the short term, the evolution of the Iran situation and whether oil prices will remain high are more important factors affecting market sentiment.

Guotai Haitong’s main points are as follows:

Non-farm employment: why did it fall unexpectedly?

In February 2026, the U.S. saw a decrease of 92,000 non-farm jobs, significantly below the market expectation of 55,000 new jobs. From an industry perspective, employment in education and healthcare declined the most, which is the main reason for the large fluctuations in non-farm employment over the past two months. On one hand, over 30,000 employees at Kaiser Healthcare went on strike in February, exerting a negative impact on employment figures. On the other hand, adjustments to the birth-death model may have amplified the volatility in non-farm data for January and February. However, other employment data do not indicate a clear risk of weakening in the U.S. labor market. Excluding technical and strike-related factors, the actual employment situation may not be as weak as reflected in the February non-farm numbers.

Unemployment rate: higher than expected

In February, the U.S. unemployment rate rose to 4.4%, above the market expectation of 4.3%. The increase in unemployment was accompanied by a decline in the labor force participation rate, which fell to 62%, below the expected 62.5%. Temporary unemployment and re-entrants are the main reasons for the rise in the unemployment rate. However, the current 4.4% level remains within the Federal Reserve’s forecast range and shows no signs of a sustained upward trend. Additionally, the U6 unemployment rate decreased from 8.0% in January to 7.9%, possibly reflecting a relative improvement in employment among marginal groups in the U.S.

Oil prices may be the main focus in the short term

Overall, the February U.S. employment data did not cause excessive concern in the market. Compared to the non-farm data, the evolution of the Iran situation and whether oil prices will stay high may be more important factors influencing market sentiment. If the Iran situation continues to escalate, leading to sustained high oil prices and a significant rebound in inflation expectations, it could put some pressure on the Federal Reserve’s pace of rate cuts.

Risk warning: Escalation of the Iran situation may keep oil prices high for a long time.