The February jobs data came in hotter-than-expected with the US Bureau of Labor Statistics reporting that 275,000 non-farm payroll jobs were added against an expected 200,000. While jobs soared above previous forecasts, the unemployment rate rose slightly to 3.9%.

Interactive Brokers Chief Strategist Steve Sosnick and UBS Global Wealth Management Chief Economist Paul Donovan join the Live show to break down the report, what it means for broader markets moving forward, and speculate what the Federal Reserve may do with the February print.

Donovan puts the numbers into perspective: "This is an ongoing problem that we've got with non-farm payroll. The data is really, really bad quality these days. Fewer than half the companies that are asked actually bother to send back their payroll numbers with the Bureau of Labor Statistics. Effectively, you're surveying a minority of companies that are being asked. We get these big revisions and I think the revised numbers are more consistent with the narrative that we're hearing elsewhere, which is, yes, things are calming down a bit. Churn in the labor market. People are job hopping. That's been declining and that's also part of this picture."

In terms of how markets are reacting to the data ahead of Friday's open, Sosnick says: "Unless the bond market really changes its view, there's nothing here that if you are inclined to continue buying the rally, there's nothing to tell you not to do that, you know, at least in the short-term. We'll worry about the longer term later."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- When we think about what we were expecting coming into this, you were looking for the consensus of about 200,000 here. We got above that. With the revisions, we actually got a revision combined of 167,000 lower than previously reported for the past two months here. Just makes sense of this for us here.

STEVE SOSNICK: Well, I think Jared said it well. I think there was something in there for the bulls and the bears. And considering this market psychology right now, the bulls are in control here. You know, yes, the headline number was a bit shockingly high, but the two-month revisions is actually quite astoundingly big. I mean, we've sucked out 167,000 before we beat by the 75,000. So call it net 100,000 down.

The month over month wage increase was 0.1 instead of 0.2. I haven't seen it out to however many significant digits it is, so we're about that 4.3 anyway. And there's nothing here to upset the bulls narrative here, despite some sort of naggingly bad pieces of bad data in there.

- Paul, what's your sense of the report that we're getting? Because yes, that headline number did come in hot. But like Steve was just pointing to, you had unemployment ticking up the downward revisions in the prior two months. Is this actually maybe a softer print than it initially looks at first take?

PAUL DONOVAN: Well, I mean, this is an ongoing problem that we've got with nonfarm payrolls. The data is really, really bad quality these days. Fewer than half the companies that are asked actually bother to send back their payrolls number to the Bureau of Labor Statistics. So effectively, you're surveying a minority of companies that are being asked.

So we get these big revisions, and I think the revised numbers are more consistent with the narrative that we're hearing elsewhere, which is, yes, things are calming down a bit. Churn in the labor market. People job-hopping. That's been declining that's also part of this picture. So overall, I think this is-- it's not a disastrous report by any means, but it's a softer report, and it's consistent with the sort of soft economic landing scenario that some of us have been calling for some time.

- When we think, Paul, as well about some of the sectors that saw the most gains here. I mean, we're talking about health care, government food service, drinking places, social assistance, some of those would kind of lend to the job-hopping nature in those industries specifically, but then where else would you look for more stickiness to start to prevail within the employment situation?

PAUL DONOVAN: Well, we're already seeing this. I mean, the JOLTS data, which is an even less reliable survey than nonfarm payrolls. It has to be said. But that saw a huge increase in vacancy numbers a couple of years ago. Not because there were necessarily more vacancies, that's not what actually is reported, but because people were changing companies a lot more. And now we're seeing actually people staying in place for longer.

The reason is, of course, a lot of people sat at home during COVID. They had some kind of midlife crisis. Decided no, I want to go out and do something completely different. But the thing is if you're going to have a midlife crisis, you're over it by now. At least you should be. And so people are now getting down to the day to day jobs that they've always been doing. So we're getting that static process coming through.

We're seeing that too in things like the Beige Book. Anecdotal evidence can perhaps be a bit more useful than these unreliable surveys at the moment. And that also is indicating that actually, people are just getting on with life now, staying put, and we're not getting this churn in the labor market.

- Steve, what do you think of the reaction that we're seeing in futures here this morning? We saw that spike higher on this softer, if you want to characterize that, softer than expected print in a number of areas. What does that then tell us just about the action that we could see as we look at the NASDAQ futures at least and the S&P futures trending to the upside?

STEVE SOSNICK: Well, I mean, first, we've gotten a lot of what I would call mysterious Friday ramps. And that's because you have weekly options expiring on Friday. So the zero DTE people who trade in Spiders, SPX index, et cetera, get to do it every day of the week. The people who trade individual options only have their zero date on Fridays. And so we've seen a lot of like ramping up.

And so there's nothing in here that prevents that. And I know that's sort of like a crazy answer saying we're going to rally just because we've been rallying, but we're in that sort of momentum-driven nutty market. So unless the narrative really changes, unless the bond market really changes its view, there's nothing here that if you're inclined to just continue buying the rally, there's no reason to tell you not to do that, at least in the short term. We'll worry about the longer term later.

- And so, I guess furthering that though, does this trigger any type of material change in people's portfolio strategy? You see like a print like this come out. Revisions with this print also come out. And now a Fed that's trying to figure out where in this tight labor market they're continuing to implement strategy or just say, you know what? We're comfortable just waiting for more data. Because they can lean on that seemingly all they want at this juncture.

STEVE SOSNICK: You know, I think if you're going to say marginally, it'll marginally move the needle toward the idea of maybe a June cut. The Fed Fund futures haven't really ticked that. It's about 98% when I checked a second ago, up from about 94. So that doesn't move the needle.

But the other thing is we've managed to go from anticipating six to seven rate cuts to somewhere between three to four rate cuts for the year, and it hasn't dampened the market's enthusiasm at all. And I'd argue, well, investors have pivoted from the idea of needing rate cuts to the idea of, OK, we've got a decent enough economy. There's nothing in here to me, and I'd certainly want to hear from Paul, whether this upsets that idea that the economy is good enough. And now actually, if there's a little less labor pressure, maybe the Fed can come a little more accommodative.

- Paul, what do you think?

PAUL DONOVAN: Well, I mean, I think the real risk that we run with the Federal Reserve is that if they do nothing on rates, real interest rates are going to be rising inflation is coming down. You know, I often say the US doesn't have an inflation problem. It's got a Florida problem and a Texas problem. Most of the US has already got inflation at or very close to 2%.

As inflation comes down, real rates are going up. And that of course is a constraint on the economy. So what the Fed's going to ask itself against the backdrop of this sort of labor report is do you want to be pushing down aggressively on the economy from this point onwards? And the answer to that has got to be no. You want maybe a neutral policy. You don't want to be boosting the economy. But holding real rates stable means that you've got to cut the nominal rate as inflation continues to decline over the next three quarters.

- All right. Paul Donovan, always great to get your insight, and Steve Sosnick, thanks so much for joining us here on set with us. We appreciate you guys both breaking down this jobs print.