The February jobs report calmed concerns that a rise in inflation could prompt the Federal Reserve to hold off on reducing interest rates this year.

The data, released Friday, showed that the US economy added far fewer jobs in the previous two months than previously believed and signs of slowing wage growth are beginning to emerge.

Meanwhile, an uptick in unemployment back to 3.9%, in line with its highest level seen in the last two years, bolstered the narrative that the labor market remains resilient but isn't growing at a pace uncomfortable for the Fed in its fight against inflation.

"Alongside the rise in the unemployment rate to a two-year high and a much weaker rise in wages, there is less reason now to be concerned that renewed labour market strength will drive inflation higher again," Capital Economics deputy chief US economist Andrew Hunter wrote in a note to clients on Friday.

Entering Friday's report, Wall Street strategists had grown increasingly concerned that a resurgence in inflation could halt the Fed's plans to cut interest rates this year. A week ago, Apollo Global's chief economist Torsten Sl?k said the Fed likely wouldn't cut rates at all this year given "sticky" wage growth and concerning underlying trends in inflation. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

But after a string of fresh economic data, other economists across the Street feel little fuel has been added to that potential fire for markets.

On Wednesday, the latest JOLTS report showed job openings approaching a three-year low while confidence among workers appears to be ebbing. The quits rate, a sign of confidence among workers, slipped to 2.1%, down from 2.2% in the previous month and marking its lowest level since August 2020.

This, Oxford Economics lead US economist Nancy Vanden Houten said, is a welcome sign on the inflation front.

"The decline in the quits rate is consistent with moderation in wage growth, which remains too rapid for the Fed," Vanden Houten wrote in a note to clients on Wednesday.

"Most measures of annual wage growth are still running above 4%, higher than the roughly 3.5% pace that is consistent with 2% inflation, assuming trend productivity growth of about 1.5%. The Fed does not need to see wage growth at 3.5% or inflation at 2% to begin cutting rates but needs to be confident that those measures are on a sustainable path back to those targets."

In February, year-over-year wage growth came in at 4.3%. But on a monthly basis wages increased just 0.1%, down from the 0.6% last month. This, economists say, is a crucial indicator that wage growth could keep slowing.

"The rise in unemployment and easing in wage inflation should make the [Federal Open Market Committee] a little more confident that the labor market is moving back into balance," JPMorgan chief US economist Michael Feroli wrote in a note to clients on Friday.

Friday's market action reflects that investors believe interest rate cuts are still coming this year.

Investor bets on when the Federal Reserve will cut interest rates were little changed following the latest jobs report, according to the CME FedWatch Tool. Markets are still pricing in a 78% chance the first Fed cut comes in June. Investors are still pricing in a range of three to four rate cuts this year.

This falls in line with commentary earlier this week from Fed Chair Jerome Powell, who said during his annual testimony on Capitol Hill he still expects cuts "at some point this year."

While a key reading on inflation scheduled for release on March 12 could challenge the narrative once again, BlackRock's chief investment officer of global fixed income Rick Rieder explained the current economic backdrop leaves "maintenance cuts" from the Fed on the table starting in May or June. This, Rieder said, would be a welcome sign for stocks.

"Historically speaking, this kind of an environment has been good for market returns, as capital begins to move out of cash and cash-like accounts into more productive areas," Rieder wrote in a note to clients on Friday.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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