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The jobs market gave market bulls another reason this morning to keep the party going, with jobs increasing at a better than expected rate in February. But positive labor market momentum means that investors may have to start getting ready for the day when the Fed will no longer be its primary prop. And that is no small matter given the Fed’s centrality to the market’s gains.

But we are not there yet and we should probably not spoil today’s fun with those worries.

Here are the details of the report.

The ‘headline’ February jobs numbers of 236K were significantly above expectations of about 160K. The consensus estimate did not rise much following the strong report from ADP on Wednesday given concerns about the effects of the Northeast snow storm, but many of us were still looking for a bigger number this morning. We had a strong February jobs report last year as well, when ‘headline’ jobs were up 271K - is there a February effect?

The revisions trend was mixed, with January down and December up, for a net negative effect of -15K. The January tally was revised down to 119K from 157K, while December was revised higher to 219K from 196K. The unemployment rate went down to 7.7% from 7.9%. The average work week edged up 0.1 hours to 34.5 hours, compared to expectations of ‘flat’ hours, while average hourly earnings increased in-line with expectations by rising 4 cents to $23.82.

The labor force participation rate ticked further down a bit to 63.5% in February from 63.6% in January. It isn’t clear at this stage whether the record low participation rate is solely a function of cyclical factors or secular elements like the ageing population is also having an impact. Perhaps it’s a little bit of both, but given the Fed’s unemployment rate targeting, the issue is no longer an academic exercise. After all, a steady drop in the participation rate will be another route for taking the unemployment rate down to the Fed’s target level.

Private sector jobs totaled 246K in February, with the government sector shedding 10K jobs. The private sector gains are significantly above January’s 140K level and December’s  224K tally, but below February 2012’s 265K gains. The February gains were concentrated in professional and business services (+73K in February vs. +16K in January), construction (+48K vs. +25K), and healthcare (+39.1K vs. +19.3K). The construction job gains were concentrated in specialty trade contractors, evenly split between the residential and non-residential areas.

Snow storms and the sequester didn’t show up in this report. And it confirms what we have been seeing lately from the weekly jobless data and the employment components of the two ISM surveys. This means that unlike February 2012, the gains may actually be for real this time.

So, are jobs back? And if they are, what does that tell us about the Fed?

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