Labor market flatlines as employers confront uncertainty
Nick Rummell
MANHATTAN (CN) — The U.S. economy added 151,000 jobs to the labor pool in February, slightly more than in January but still fewer than analysts hoped.
The job gains reported Friday morning by the Bureau of Labor Statistics were just shy of the 170,000 median forecast but not as bad as some economists had predicted in recent days. The unemployment rate nudged upward to 4.1%, compared with last month’s 4% rate.
Thomas Ryan, an economist at Capital Economics, wrote in an investor’s note the jobs report “confirms the economy started the year soft but is not plummeting towards a recession.”
The lackluster employment news was offset by minor positive revisions to the January and December jobs reports, which were updated to reflect an additional increase of 18,000 and 16,000 jobs, respectively.
Health care, financial services, transportation and warehousing all saw notable increases, with health care leading all sectors with 52,000 new jobs. As predicted, federal employment fell, though the 10,000-job decrease did not incorporate most of the recent downsizing by the Elon Musk-run Department of Government Efficiency.
“The upshot is that the labor market remains in decent shape and should be able to weather the DOGE-related cull of federal government employees, although we will have to wait until next month to assess the damage,” Ryan wrote.
Private sector job gains also fell well short of expectations, with payroll company ADP reporting an increase of just 77,000 jobs in February compared with the 150,000 many analysts had predicted — the smallest increase since July 2024.
While the gains were split fairly evenly among manufacturers and the service sector, small businesses actually lost jobs last month. Medium- and large-sized companies — those with between 50 and 499 employees, or at least 500 employees, respectively — gained a total of 83,000 jobs.
Wages also remained slightly flat and came in at the lowest level seen since the first half of 2021, though they still are outpacing inflation. Year-over-year pay increases for those changing jobs gained just 0.1% in February, and the corresponding pay for those staying at their jobs remained flat.
“Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” Nela Richardson, chief economist at ADP, said in a statement. “Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.”
Certain industries are faring worse than others. Most job losses seem to be concentrated among industries affected by cuts by DOGE, such as education and health care, or where uncertainty about tariffs could have an impact.
“Price-sensitive behavior by consumers, plus high prices from tariffs, could be causing retailers to look for ways to cut costs, like cutting headcount,” said Bill Adams, chief economist at Comerica. He estimates that DOGE cuts will be a significant headwind to the labor market, adding 250,000 to 500,000 unemployed workers to the labor pool.