facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

Weekly Update 03/07/2025: US Adds 151,000 New Jobs in February as Unemployment Rate Ticks up to 4.1%

Insights
  • Stryker announced the launch of the Sync Badge, a hands-free, wearable device designed to enhance communication and collaboration in the fast-paced environment of hands-on patient care
  • Accenture announced it has acquired Halfspace, a Denmark-based AI company & they also snapped up Altus Consulting to further enhance its strategic advisory and delivery services for insurance, investments, and other financial services businesses across the UK
  • Amgen launched two final-stage studies of MariTide - its monthly obesity treatment

Domestic Economic News

US job growth steadied last month while the unemployment rate rose — a mixed snapshot of a job market hanging on the balance of quickly changing government policy. Nonfarm payrolls increased 151,000 in February after a downward revision to the prior month, according to a Bureau of Labor Statistics report out Friday. The unemployment rate rose to 4.1%. Friday’s report is the latest evidence that the labor market is softening, with more people permanently out of work, fewer workers on federal government payrolls and a jump in those working part-time for economic reasons. The number of Americans holding multiple jobs climbed to a record of nearly 8.9 million. That sets a weak backdrop just as President Donald Trump’s policies raise concerns about the broader economy. Inflation has proven sticky in recent months and consumers are starting to pull back on spending, which, if sustained, may lead businesses to rethink their hiring plans. Federal Reserve policymakers have indicated they would like to see more progress that inflation is sustainably easing — including in next week’s consumer price index — before they resume cutting interest rates. Coupled with high uncertainty around the Trump administration’s policies, officials are widely expected to keep rates steady at their meeting later this month. The advance in hiring was led by health care, transportation and financial activities. Government payrolls — which have been a key driver of payrolls in recent years — climbed at the weakest pace in nearly a year, while federal payrolls were down by the most since June 2022.

US factory activity last month edged closer to stagnation as orders and employment contracted, while a gauge of prices paid for materials surged to the highest since June 2022 as tariff concerns mounted. The Institute for Supply Management’s manufacturing index slipped by 0.6 point in February to 50.3, according to data released Monday. Readings above 50 indicate growth. The group’s price measure increased 7.5 points to 62.4. Rising input costs represent a challenge for manufacturers against a backdrop of shrinking orders that suggests demand is at risk of retrenching as businesses weigh the implications of tariffs from the Trump administration. Producers may be hard pressed to pass on higher costs should sales continue to weaken. After contracting in September for the first time since 2023, prices paid have shown growth for five straight months. While that suggests inflationary pressures are heating up again in the production pipeline, it’s unclear to what extent manufacturers can pass along those higher costs. “Demand eased, production stabilized, and de-staffing continued as panelists’ companies experience the first operational shock of the new administration’s tariff policy,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement. “Prices growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery stoppages and manufacturing inventory impacts.” Prices for steel and aluminum rose immediately after Trump’s announcement of tariffs, and some suppliers are not taking as many new orders because of disagreements about who will pay the additional cost, Fiore said on a call with reporters. Last Friday, a government report showed the Federal Reserve’s preferred measure of underlying inflation, the so-called core personal consumption expenditures price index, rose in January at a subdued pace while consumer spending fell by the most in nearly four years.

US service providers expanded in February at a faster pace as resilient demand helped drive a measure of employment to a more than three-year high. The Institute for Supply Management’s gauge of services advanced to 53.5 from 52.8 a month earlier, according to data released Wednesday. Readings above 50 signal growth, and the latest figure exceeded economists’ expectations. The group’s index of services employment climbed for a third month to 53.9, the highest since December 2021. Separate figures out earlier showed the smallest advance in private-sector payrolls last month since July, with job cuts in the services sector and regions impacted by harsh winter weather. A measure of costs paid for materials and services increased to one of the firmest readings since early 2023, underscoring the challenge Federal Reserve policymakers face as they look to further tamp down inflationary pressures. While the ISM survey suggests service providers are signaling steady business activity, recent monthly data from the government indicate the economy was off to a rough start at the turn of the year. The Atlanta Fed’s GDPNow forecast currently projects gross domestic product will decline in the first quarter. A spike in imports accounts for a large share of the setback, reflecting a scramble by companies to secure goods from overseas ahead of tariffs from the Trump administration. Business investment, consumer spending and homebuilding were also notably weak in January. “Slightly slower growth in the Business Activity Index was more than offset by growth in the other three subindexes,” Steve Miller, chair of the ISM Services Business Survey Committee, said in a statement. “Anxiety continues; however, over the potential impact of tariffs. Some respondents indicated that federal spending cuts are having negative impacts on their business forecasts.” Fourteen industries, including finance and insurance, wholesale trade and utilities, reported growth in February. Three industries contracted. The biggest concern expressed about tariffs was business uncertainty and the inability to get long-term agreements in place, and “the favorite word seems to be chaos,” Miller said on a call with reporters.

Applications for US unemployment benefits fell last week, returning to muted levels seen at the start of the year. Initial claims decreased by 21,000 to 221,000 in the week ended March 1. The median forecast in a Bloomberg survey of economists called for 233,000 applications. Continuing claims, a proxy for the number of people receiving benefits, rose to 1.9 million in the previous week, according to Labor Department data released Thursday.

Canada’s exports to the US reached a fresh record on shipments of cars, auto parts and oil, helping the northern nation post its highest-ever trade surplus with the US. The country’s merchandise trade surplus with the US widened to C$14.4 billion ($10 billion) in January, from C$12.3 billion in December, Statistics Canada said Thursday. Exports to the US surged 7.5% in January and set a record for a second consecutive month. The data show how the uncertainty around US President Donald Trump’s tariffs have influenced trading flows and business decisions, with exporters and importers trying to avoid higher costs due to steep levies. Sweeping tariffs on Canada and Mexico were initially expected to start as soon as inauguration day on Jan. 20, before Trump announced a Feb. 1 start date. After a one-month delay, the Trump administration on Tuesday imposed 10% tariffs on Canadian energy products and 25% duties on everything else the US buys from Canada and Mexico, with automakers getting a reprieve until April. Additional levies targeting what Trump views as trade imbalances are also expected next month. The Canadian government this week immediately hit back with retaliating levies on C$30 billion worth of American products, including appliances, cosmetics, fruit and tires. The list will be broadened in three weeks and cover American-made vehicles and other products, totaling C$155 billion in import value. The overall US trade deficit widened to a record $131.4 billion in January, according to Commerce Department data that was released at the same time as the Canadian figures. Overall in January, Canadian exports exceeded imports by C$4 billion and as a result, its trade surplus with the world widened from an upwardly revised C$1.7 billion in December. Economists in a Bloomberg survey were expecting a much smaller C$1.3 billion surplus. Exports jumped 5.5% in the first month of the year and imports rose 2.3%, both reaching record highs with a fourth straight monthly increase. Shipments to the US underpinned the surges in key export products including motor vehicles and parts, energy products and consumer goods. Canada’s economy depends heavily on its ability to trade with the US. In 2024, the combined value of Canada’s imports and exports of goods traded with the US surpassed the C$1 trillion mark for a third straight year. The US was the destination of 75.9% of Canada’s total exports and was the source of 62.2% of Canada’s total imports. Shipments to countries other than the US fell 1% in January. Auto exports, with more than 90% of passenger cars and light trucks destined for the US, rose the most in January, soaring 12.5%. Energy exports grew 4.8%, driven by crude oil and natural gas bound for the US, while exports of consumer goods rose 7.8%, mainly because higher shipments of pharmaceutical products to the south. Exports of industrial machinery also grew, again primarily due to increases in US demand.

In news late Thursday, President Donald Trump exempted Mexican and Canadian goods covered by the North American trade agreement known as USMCA from his 25% tariffs, offering major reprieves to the US’s two largest trading partners. Trump signed orders Thursday paring back the tariffs, which are related to illegal immigration and fentanyl tracking, until April 2. That is the date when the president is expected to start unveiling plans for so-called reciprocal duties on nations around the world as well as sector-specific duties. “They’ve been working much harder lately, do you notice that? On people coming in and drugs. We’ve made tremendous progress on both,” Trump said in the Oval Office, referring to Mexico and Canada. Automobiles and parts that meet USMCA requirements are among the products exempt from the tariffs. Canadian potash used heavily in fertilizers for US agricultural producers faces a lower 10% duty. The White House estimates that 62% of Canadian imports will still be subject to the tariffs, most of which are energy products that are being tariffed at a 10% rate, and half of goods coming from Mexico. A White House official cautioned those proportions could change as importers rush to comply with the new rules.

Interest Rate Insight and the Fed

Traders added to bets on interest-rate cuts from the Federal Reserve amid concern about the impact of US trade tariffs on global economic growth. Money markets moved to fully price three quarter-point reductions this year for the first time since the middle of December, following the imposition of US levies on Canada, Mexico and China. The curve steepened, with yields on two-year tenors falling six basis points to 3.89%. The steepening moves were mirrored in Europe, with traders similarly amping up wagers on easing from the European Central Bank on concern that the euro area will be next to face levies. Meanwhile, an aggressive ramp up in EU defense spending pinned the spotlight on growing government deficits and pushed longer-term yields higher. The imposition of tariffs marks a turning point for market participants, indicating Trump’s readiness to use threats as more than a negotiating tactic. The new 25% duties on most Canadian and Mexican imports — plus raising the charge on China to 20% — impact roughly $1.5 trillion in annual imports. The US measures prompted retaliatory levies from both Canada and China, with Mexican President Claudia Sheinbaum on Monday saying her government would await Trump’s decision before reacting.

The increased trade tension is fueling worries about the outlook for the US economy. As mentioned above, data this week on factory activity suggests it is edging closer to stagnation, raising the stakes for the widely-watched labor market report. If US economic data continues to soften, “the strong US dollar fundamentals of strong growth, elevated inflation, and a more hawkish Fed will come into question,” said Win Thin, global head of markets strategy at Brown Brother Harriman. Beyond tariffs, markets were whipped on Tuesday by a barrage of headlines on the US pausing military aid to Ukraine and that the EU is looking to extend €150 billion ($158 billion) in loans to boost defense spending. That spurred a wave of risk aversion, with the Swiss franc and Japanese yen leading gains by Group-of-10 currencies against the dollar while stocks slumped. Bloomberg’s Dollar Spot Index — previously a beneficiary of tariff talk — slipped 0.5% on Tuesday. “It’s going to be a bumpy ride,” said Chris Turner, head of FX strategy at ING, adding that plans for aggressive defense spending in Europe and concerns around the US economic outlook are weighing on the greenback for now. However, “we still think the dollar will broadly strengthen in the first half of the year.”

Federal Reserve Bank of New York President John Williams said he anticipates tariffs will contribute to inflation but emphasized there is a lot of uncertainty about how the economy will respond to President Donald Trump’s levies. “Based on what we know today, given all the uncertainties around that, I do factor in some effects of tariffs now on inflation, on prices, because I think we will see some of those effects later this year,” Williams said Tuesday during the Bloomberg Invest conference in New York. You also “have to factor in how does that affect economic activity — decisions by businesses to invest, consumers to spend?” Williams said. “And that’s where I think another big uncertainty is.” When asked whether policymakers will consider adjusting interest rates at this month’s meeting, Williams said monetary policy is in a good place and that he doesn’t see the need to change borrowing costs right away. He described policy as “modestly restrictive,” and reiterated he expects inflation to move toward the central bank’s 2% goal over time. Policymakers left borrowing costs unchanged in January after lowering their benchmark interest rate by a full percentage point late last year. Officials have said they want to leave rates steady until they see more evidence inflation is on track to reach 2%. During the conversation with Bloomberg Television’s Michael McKee, Williams said he expects good growth this year, albeit slower than last year. The New York Fed chief said businesses passed through the costs of tariffs to their customers after the levies were enacted on some goods in 2018. While firms are more attuned to how to pass along price increases, he said many consumers are also more price sensitive. Williams said he is watching inflation expectations “very closely” and said talk about tariffs is influencing how consumers think about price growth in the near term. However, he said he still isn’t seeing “as much of an indication in most of these surveys that that’s about long-run inflation or inflation in the future.”

Economic activity rose “slightly” since mid-January but businesses across the country reported uncertainty surrounding new policies from the Trump administration, particularly on tariffs, the Federal Reserve said in its Beige Book survey of regional business contacts. Prices climbed “moderately” in most areas, with several regions reporting faster price increases compared to the previous period. Looking ahead, firms across the country “expected potential tariffs on inputs would lead them to raise prices, with isolated reports of firms raising prices preemptively.” Tariff mentions came up 49 times in the Fed report released Wednesday, while variations of the word uncertainty appeared 47 times. The Beige Book, which was compiled by the Federal Reserve Bank of Minneapolis using information gathered on or before Feb. 24, includes anecdotes and commentary on business conditions in each of the 12 Fed districts. The Fed said “unusual weather conditions” in some areas weakened demand for leisure and hospitality. “Consumer spending was lower on balance, with reports of solid demand for essential goods mixed with increased price sensitivity for discretionary items, particularly among lower-income shoppers,” according to the report. The report showed a mixed employment picture, with seven areas indicating no change in the period. Multiple contacts cited uncertainty over immigration and other policies as influencing current and future labor demand. “Wages grew at a modest-to-moderate pace, which was slightly slower than the previous report, with several districts noting that wage pressures were easing,” the report said. The Beige Book is one of the regular economic briefing documents officials get before their policy meeting. Fed officials next meet March 18-19. Policymakers are widely expected to keep borrowing costs steady at that gathering. Concerns about weakening growth have increased among economists and market participants in recent weeks, fueled by President Donald Trump’s tariffs and speculation that other policies, like deportations and reduced immigration, could also restrain the economy.

Impactful International News

Euro-area inflation eased, boosting confidence that it’s approaching the 2% target as the European Central Bank enters the last leg of interest-rate cuts. Consumer prices rose 2.4% from a year earlier in February, down from 2.5% in January, Eurostat said. That’s just above the 2.3% median estimate in a Bloomberg survey of economists. While still elevated, services inflation — which policymakers have been paying particular attention to — dipped to 3.7%. That’s the first major retreat from 4% since April 2024. The euro extended gains after the slightly higher headline number, rising as much as 0.6% to $1.0439 and German bond yields increased further, with the 10-year rate up four basis points to 2.45%. Monday’s data offered further reassurance to ECB officials who say their price goal will be met sustainably in the months ahead. While focused on that aim, they’re also navigating flimsy economic growth in the 20-nation currency bloc, the threat of US trade tariffs and chaos over Ukraine peace talks. They’ll take particular comfort from the moderation in the services sector, where they’ve long been predicting some relief as the strong gains in wages sparked by the surging inflation of recent years begin to abate. National data last week showed diverging trends. Readings in Germany, Italy and Spain held steady either side of the ECB’s target, while France’s sank to 0.9%. But there was widespread evidence of the easing in services. The ECB has cut rates five times since June. Analysts predict back-to-back steps until the deposit rate — currently 2.75% — reaches 2%. Investors, though, reckon a pause is possible in April. Views within the Governing Council are diverging. Hawks advocate a more cautious approach, to avoid lowering rates by too much. Others are more concerned that a stuttering economy will drag inflation below 2%. A major issue is that borrowing costs are nearing neutral levels where they neither restrain nor stimulate economic activity. Investors will be watching this week to see whether the ECB continues describing its stance as “restrictive,” or whether it opts for different language that signals it may take a breather in the months ahead.

President Xi Jinping heads into China’s biggest political huddle of the year with his economy finally getting back some swagger. Donald Trump’s rising tariffs will test Beijing’s ability to sustain that momentum. Breakthroughs in artificial intelligence and Xi’s recent embrace of private entrepreneurs such as Alibaba’s Jack Ma have driven a blistering equity rally ahead of the National People’s Congress. But that optimism is already being tainted, with Trump’s latest 10% tariff set to take effect just one day before Premier Li Qiang lays out China’s economic blueprint for the year. Thousands of delegates including ministry chiefs and provincial leaders gathered Wednesday in Beijing for the parliamentary conclave, where officials will set a bullish growth goal of around 5%, according to most analysts surveyed by Bloomberg. To get there, policymakers are expected to push China’s official budget deficit target to the highest in over three decades, pumping trillions of yuan into a system battling deflation, a property crash and now a trade war with the US. Almost two months into Trump’s new presidency, the world’s largest economies are on a collision course that makes it increasingly urgent for the Communist Party to unleash the spending power of its population. Unlike last year, there’s little chance Beijing can bank on a boom in exports, and leaders have instead vowed to prioritize expanding domestic demand. China is poised to change its policy “quite a lot” this year, said Yao Yang, a professor of economics at Peking University, who cautioned the measures still might not be sufficiently bold. “My first worry is the fiscal stimulus isn’t big enough, particularly when we consider local government debt,” he said. “Secondly, if China and the US cannot negotiate a settlement, the American government probably will increase tariffs. Then we are going to get into a tit-for-tat war. That’s going to be very bad.” Currency traders are watching closely for stimulus details as authorities have been focusing more on keeping the yuan stable than on easing policy. The People’s Bank of China has consistently set the fixing rate above 7.2 per dollar, pushing back against speculation that China might devalue its currency to offset economic losses from the trade war.

The European Union is moving toward easing its fiscal rules to allow for more defense spending after a U-turn from Germany won support from some traditional opponents of increasing borrowing. With EU leaders gathering in Brussels Thursday to discuss their response to Donald Trump’s push for a settlement on Ukraine, there’s a growing consensus among member states that they should explore changes to the so-called Stability and Growth Pact, people familiar with the matter said. On the morning of the talks, EU ambassadors discussed including a commitment to “explore further adaptation of the Pact” in the summit conclusions in response to a request from Germany, the people said. Most delegations were in favor of that wording, though some were suggesting vaguer language. The issue will be discussed by leaders later in the day. For decades, European policy has been shaped and constrained by Germany’s insistence on controlling public borrowing, both at home and in other member states. But Trump’s return to the White House, and his insistence that the US should no longer be the main guarantor of security in Europe, has prompted a dramatic shift in Berlin, with chancellor-in-Waiting Friedrich Merz this week unveiling a massive spending plan that aims to transform Germany’s military. “We must ensure in the long term that states can spend as much on defense as they want,” the current chancellor, Olaf Scholz, said as he arrived at the summit, insisting the EU needs “a long-term change of the rules to make sure member states can make their own decisions on defense spending.” With Trump pulling back US support, the EU and its member states need to mobilize potentially trillions of euros in additional defense funds to counter the threat of Russian aggression.

The European Central Bank lowered interest rates for the sixth time since June and indicated that its cutting phase may be drawing to a close as inflation cools and the economy digests seismic shifts in geopolitics. The deposit rate was reduced by a quarter point to 2.5%, as predicted by all but one analyst in a Bloomberg survey. Officials described their monetary-policy stance as becoming “meaningfully less restrictive,” repeating that they won’t commit to any particular path for borrowing costs. “The interest-rate cuts are making new borrowing less expensive for firms and households and loan growth is picking up,” the ECB said in a statement. “At the same time, a headwind to the easing of financing conditions comes from past interest-rate hikes still transmitting to the stock of credit, and lending remains subdued overall.” Changing its statement language will feed speculation that the ECB is contemplating a timeout from rate cuts next month, confident that its 2% inflation goal is within reach. That may be bad news for Europe’s stuttering economy, which as well as US trade tariffs must now also deal with a glut of spending to retool the continent’s armies. “The disinflation process is well on track,” the ECB reiterated, though it dropped wording saying it would meet its inflation target “in the course of this year.” Instead, it said simply that underlying price data suggest it will do so “on a sustained basis.” The euro extended gains to hit the day’s high while bonds fell following the ECB’s statement. The yield on 10-year German notes was up five basis points to 2.84%, while traders pared wagers on further easing to bet on just 43 basis points more by year-end.

“With the increased uncertainty and the prospects of large fiscal stimulus, the ECB’s direction of travel after today’s rate cut is no longer as clear as it was a few weeks ago,” Carsten Brzeski, ING’s global head of macro, said by email. “A pause at the next meeting to come to terms with the new macro reality now looks like a possibility.” Updated quarterly projections largely confirmed the ECB’s outlook for prices, while lowering it for growth this year and next. But they don’t capture the consequences of President Donald Trump’s abrupt pullback in military backing for Ukraine and Europe. That jolt alone looks set to trigger hundreds of billions of euros in new defense outlays by European governments, with implications for inflation, economic expansion and debt. Leaders will work on the details at a summit on Thursday. Things have been looking up for the ECB on the inflation front. February’s reading dipped to 2.4% and, crucially, a closely watched gauge of services-price increases registered its first major retreat from 4% since April 2024.

Company Events

SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.

Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Steigerwald, Gordon & Koch, Inc. [“SGK”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from SGK. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SGK is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the SGK’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.sgkwealthadvisors.com. Please Note: SGK does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SGK’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a SGK client, please contact SGK, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.