STORY: A closely watched U.S. jobs report showed the economy unexpectedly shed 92,000 jobs last month and the unemployment rate rose to 4.4%.

The numbers hint at a potentially deteriorating labor market that could put the Federal Reserve in a tough spot when it comes to whether it should continue to lower interest rates.

The results of the Labor Department's nonfarm payrolls report for February surprised many economists, who had forecast payrolls advancing by nearly 60,000 jobs.

Cory Stahle is a senior economist for Indeed Hiring Lab.

"This is a report that is clearly concerning. Not only was the number of jobs added concerning, but we start to look at areas like healthcare, an area where we've seen a lot of jobs being added in the past, also showed some weakness. Part of that was due to a strike in California, but even if we add that employment back in, healthcare was still pretty weak in terms of job gains in February. And beyond that we just saw that pretty much across the board jobs were lost in February. And that's never going to be an encouraging sign."

The decline was the sixth since January 2025, and the second largest.

The labor market stumbled last year amid what economists said was uncertainty stemming from President Donald Trump's sweeping tariffs, which were struck down last month by the U.S. Supreme Court.

Trump responded by imposing a 10% global tariff and later announced it would rise to 15%.

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Economists saw a downside risk to the labor market from a prolonged war in the Middle East, which is driving up oil prices and causing stock market volatility.

A Morgan Stanley economist told Reuters that Friday's jobs numbers put the Fed, quote, "between a rock and a hard place," explaining that while a weakening labor market would support a rate cut, "higher-for-longer oil prices could trigger another inflation surge" and therefore prevent the Fed from lowering interest rates.

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The U.S. central bank holds its next policy meeting later this month.

U.S. stocks opened sharply lower Friday after the report's release.