Economists also see the dip as a payoff after a big increase in January wages that they say is buoyed by an update to a so-called birth-and-death model, which the government uses to estimate how many jobs are gained or lost as companies open or close.
Even accounting for these factors, economists said the February employment report challenged the U.S. central bank’s philosophy that the labor market is stable. Economists have seen the risk of a negative impact on the labor market due to the protracted war in the Middle East, which is driving up oil prices and causing stock market volatility. The labor market is set to stagnate in 2025 due to what economists say is uncertainty caused by President Donald Trump’s sweeping tariffs, which he has pursued under legislation to be used in national emergencies. Although the import duties were overturned by the US Supreme Court, Trump responded by imposing a 10% global tariff and later announced that it would rise to 15%.
“It’s bad news any way you look at it,” said Olu Sonola, chief U.S. economist at Fitch Ratings. “Add renewed tariff noise, higher energy prices and renewed inflationary pressure, and the Fed is basically a deer in the headlights until these numbers reach a sustainable, actionable trend.”
The Bureau of Labor Statistics said nonfarm payrolls fell by 92,000 jobs last month after a revised low of 126,000 in January. Economists polled by Reuters had forecast payrolls would rise by 59,000 jobs after rising by 130,000 in January. Estimates range from a loss of 9,000 jobs to an increase of 125,000 positions. While some economists cautioned against putting too much emphasis on the one-month report, the trend in job growth weakened, with an average monthly gain of 6,000, up from 50,000 in the three months from February to January.
“This will make it harder for the Fed to sell the narrative of labor market stability that is being used to justify being patient with further rate cuts,” said Alice Ausenbaugh, director of investment strategy at JP Morgan Wealth Management. Economists still expect the Fed to keep overnight interest rates in the 3.50%-3.75% range at its March 17-18 meeting. But the chances of a June rate cut have increased. The decline in wages reported last month in an establishment survey was almost across the board and was led by the health care sector, which shed 28,000 positions after a large increase of 77,000 in January.
Employment at doctors’ offices fell by 37,000, mostly reflecting a strike by 31,000 healthcare workers over Kaiser Permanente and bad weather. The strike in California and Hawaii ended after that. The healthcare sector was the main driver of job growth. The weakness was widespread
Employment in the information sector fell by 11,000, while the federal government lost another 10,000 jobs. Federal government employment fell by 330,000, or 11.0%, to the end of October 2024 as the White House continues an unprecedented push to reduce the government’s footprint. Transportation and warehouse wages fell by 11,000, weighed down by job losses among couriers and messengers. Construction employment fell by 11,000, with residential specialty trade contractors accounting for most of the decline.
Entertainment and hospitality wages fell by 27,000, with most of the decline coming from restaurants and bars. Heavy snow and cold temperatures are likely to keep people indoors in large parts of the country. But the bad weather argument is challenged by the length of the work week, which averages 34.3 hours, has changed since January. Additionally, 228,000 people reported that they were unable to report to work due to bad weather in February, down from just over 218,000 in January.
There were also job losses in professional and business services as well as manufacturing, which lost 12,000 jobs. Despite Trump’s insistence on restoring domestic manufacturing jobs through measures like tariffs, factory jobs have now fallen across the board since his return to the White House.
A few sectors have made gains, including social assistance and financial activities. The share of industries reporting job growth fell to 50.8% from 54.6% in January.
But there was some good news for families.
Average hourly earnings rose 0.4% after a similar gain in January. In the 12 months to February, wages rose 3.8% after a 3.7% advance in January.
Solid wage growth should help curb consumer spending, while rising gas prices pose a challenge.
Stocks were trading lower on Wall Street. The dollar fell against a basket of currencies. US Treasury yields fell. The BLS added new population controls to the household survey based on updated estimates from the Census Bureau, which showed slower population and labor force growth, partly due to weaker net immigration amid a crackdown by the Trump administration.
The civilian non-institutionalized population decreased by 231,000, while the labor force and the employment rate each decreased by 1.4 million. The revisions only affected household survey data in January. The labor force participation rate fell to 62.1% from 62.5% in January.
The participation rate fell to 62.0% in February, the lowest level since December 2021. Household employment fell by 185,000, accounting for an increase in the unemployment rate from 4.3% in January.
“With labor force growth now materially weak, the labor market is operating with a very thin supply buffer, which increases the risk that wage pressures will remain flat even as demand cools,” said EY-Parthenon chief economist Gregory Dako.
