Hiring Picked Up in February

U.S. employers added 151,000 new jobs in February, an increase from January but a little less than economists had expected, according to the latest employment report from the U.S. Bureau of Labor Statistics (BLS).

The jobs count for December was revised up by 16,000 to 323,000, while January’s figure was cut by 18,000 down to 125,000.

“Although total payroll growth for February came in slightly below expectations, the overall state of the labor market is relatively stable, despite recent policy uncertainty amid conflicting economic news,” said Sydney Ross, an economic researcher at SHRM. “It should be noted that the jobs report is a lagging indicator of actual labor market conditions, due to the way data is collected, and may not reflect real-time changes in a highly dynamic environment.”

The unemployment rate in February ticked up from 4.0% to 4.1%, within a historically low range, and claims for unemployment benefits have remained muted. And while other indicators show a spike in layoffs due to the Trump administration’s slashing of the federal workforce, the bulk of the cuts are not included in this month’s survey data set. It’s more likely that federal cuts will be visible in the March and April jobs reports.

The White House’s efforts to pare down the federal government, however, starting with buyout incentives and including mass layoffs are beginning to show. Federal government employment declined by 10,000 in February, according to the BLS, while an updated count from outplacement firm Challenger, Gray & Christmas reported 62,000 federal worker layoffs as a result of the seven-week-old Department of Government Efficiency.

The U.S. labor market remains “frozen in place” as uncertainty around tariffs and immigration policy continue to slow gains, said Edward Hearn, lead economist at UKG.

Ger Doyle, U.S. country manager at ManpowerGroup agreed, saying that the jobs report “reflects a market trying to balance itself as consumer confidence falls and economic uncertainty persists. The U.S. labor market is proving to be resilient, but it remains challenging for those looking for new jobs and there are signs of cooling that we would expect when employers are more cautious.”

Doyle said that the typical increase in job postings between January and February did not materialize this year, as real-time Manpower data shows hiring demand down 6%.

Sam Kuhn, an economist at Appcast, said that the BLS employment data from February indicates that the labor market is growing at a remarkably steady rate, and that it is mostly healthy, citing six-month job growth above 190,000 jobs per month and stable wage growth.

But some economists are beginning to warn of rising uncertainty and recession risks in the economy, citing an economic slowdown and falling consumer sentiment. Some private-sector companies are putting hiring plans on hold due to the implementation of tariffs and federal spending cutbacks.

Cory Stahle, an economist with the Indeed Hiring Lab, pointed out potential trouble brewing beneath the surface, including stubbornly high inflation, downstream effects from the rapid reversal in federal government hiring and how difficult it remains for unemployed people to land new jobs.

“Going forward, the full impacts of all the new policies, proposals, and abrupt reversals that are the hallmarks of this administration will begin to shape the official statistics,” he said. “The ability of the market to continue to maintain its ‘business as usual’ momentum will be tested, and the anticipated soft economic landing continues to hang in the balance.”

Ross said that she expects policymakers, and particularly the Federal Reserve, to pay close attention to next week’s report on inflation and next month’s jobs report, as well as wait for clarity on potential trade and immigration policies, before making any broader changes to monetary policy going forward.

“Companies are keeping a close eye on factors like wage pressures, technology-driven shifts, and broader economic uncertainty — all of which could influence hiring trends in the months ahead,” said Geno Cutolo, president of Adecco North America. “For both employers and job seekers, adaptability will be key to navigating what’s next.”

Industry Breakdown

Health care once again led the way in job creation, adding 52,000 jobs, about in line with its 12-month average. Other sectors posting gains included financial activities (21,000), transportation and warehousing (18,000), and social assistance (11,000).

Over the month, employment continued to trend up in real estate (10,000) and insurance (5,000) while commercial banking lost 5,000 jobs. The airlines gained about 4,000 jobs.

Retailers shed 6,000 jobs, and restaurants and bars lost 27,500 jobs, possibly an indication that immigration restrictions are beginning to affect labor supply.

“Restaurants, in particular, are feeling the squeeze,” said Julia Pollak, chief economist at ZipRecruiter. “That sector is struggling with the lingering effects of high inflation and high interest rates, which have made it harder for small businesses — many of which rely on credit card financing — to stay afloat. That’s a particular concern because restaurant jobs often serve as an entry point to the labor market.”

“Businesses are in a wait-and-see mode, where every shift in policy can potentially lead to entirely different outcomes for their businesses,” Doyle said. “This uncertainty is creating hesitancy to hire and invest which can create a ripple effect, especially in sectors like manufacturing, where every decision counts.”

The construction industry added 19,000 jobs in February. That growth could soon be challenged. “Volatility in construction has been the canary in the coal mine this month, as supply issues and persistently high interest rates have hit this industry the hardest,” Hearn said. “Residential construction, alongside utility-system building, have seen the biggest declines in working activity. We expect these severe headwinds to persist and possibly expand given the joint impact of expanded tariffs on construction materials and the extent of labor disruptions due to potential deportations.”

Hearn added that the impact of AI on the labor market can be glimpsed, as two out of three of the most AI-exposed industries, computing and mathematical industries, and educational services, have experienced sizeable decreases in weekly earnings relative to last year.

“One thing is certain — this technological disruption is reshaping job roles and reducing demand for certain white collar skill sets,” he said.

Unemployment Ticks Up

The number of unemployed people rose in February by about 200,000 to 7.1 million. About 21% of all unemployed people are considered long-term unemployed (those jobless for 27 weeks or more). A broader measure of unemployment that includes discouraged workers and those holding part-time positions for economic reasons jumped to 8%, its highest level since October 2021.

That metric, combined with the finding that average weekly work hours fell last month, suggests some employers are cutting back on hours rather than cutting jobs outright, Pollak said.

The labor force participation rate slumped to 62.4%, its lowest level since January 2023, as the labor force declined by 385,000.

“The share of prime-age workers in the labor force held steady at 83.5%, just below its cyclical peak last year,” Pollak said. “A few signs of softening are emerging,” she added. “The prime-age employment-population ratio dipped to 80.5%, a bit below where it was a year ago but still historically strong.”

Wage Growth Holds

Average hourly earnings climbed 0.3%, as expected, though the annual increase of 4% was softer than the 4.2% forecast.

“While forecasters had expected year-over-year average hourly earnings to tick up, year-over-year average hourly earnings growth came in slightly below expectations, a welcome sign for employers and policymakers concerned about rising compensation costs that nominal wage growth is starting to show some evidence of easing,” Ross said.

“Wage growth remains strong, suggesting that demand for workers hasn’t collapsed,” Pollak said. “The Fed will likely welcome signs of a cooling job market, but policymakers will also be watching for signs that the softening is turning into something more serious.”