Employment growth rebounded in February as the US economy added 151,000 jobs, according to Bureau of Labor Statistics data released Friday.
The unemployment rate, however, edged up to 4.1% from 4% the month before. The labor force participation rate slipped as well.
Employment growth came in a little under economists’ expectations for a 160,000-job gain, but picked up from January, a month where wildfires and weather likely affected the numbers: January’s payroll growth was revised down to 125,000 from 143,000.
On one hand, February’s jobs report marks another month of seemingly solid job gains and a continuation of a historic expansion of the US labor market.
On the other, it provides a “a snapshot of a prior age, before the shift in federal government policies undermined confidence,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, wrote in a note to investors on Friday.
“It’s either the calm before the calm, or the calm before the storm,” economist Sean Snaith, director of the University of Central Florida’s Institute for Economic Forecasting, wrote Friday.
The impact of DOGE
In recent weeks, the Trump administration has made monumental policy shifts — including large-scale federal layoffs, funding cutbacks, a back-and-forth on tariffs and mass deportations — that have spilled into the broader economy, shaking business and consumer confidence, and tripping several economic warning signals.
However, the Department of Government Efficiency-driven employment cuts weren’t expected to make a big splash in February’s jobs report. That’s partly because of timing of the two surveys that feed into the monthly employment snapshot and also due to the structure of employment separation agreements.
Still, Friday’s report gave a hint of what could come: The federal government posted a loss of 10,000 jobs for the month, with 3,500 of those losses coming from the US Postal Service.
That dampened employment gains in the broader public sector, which has been one of three key drivers (health care and leisure and hospitality being the others) of overall job growth with most of the credit going to strong gains in state and local governments.
In February, the overall government sector gained only 11,000 jobs, the lowest monthly total since April 2024. For the federal government, it was the worst month for job losses since June 2022.
“The economy is off to a slow start under the new president,” Chris Rupkey, chief economist at FwdBonds, wrote in commentary on Friday. “You can’t have mass firings of federal workers and government contractors and think it is not going to mean job losses for the private sector.”
That’s expected to be the case in the weeks and months to come, according to new data released Thursday by Challenger, Gray & Christmas, which has tracked layoff announcements since 1993. The number of job cuts announced in February was north of 172,000, marking the 12th highest total on record.
The health care sector, which has been the biggest driver of employment growth in recent years, continued to post strong gains, adding 52,000 jobs last month. However, the top job creator, sector that relies heavily on federal support (including funding and grants) is also under threat: President Donald Trump is reining in federal spending as he aims to extend his costly 2017 tax cuts.
House Republicans are advancing a budget that would bring major cuts to Medicaid, a federal program used by 72 million Americans — which also supports tens of millions of jobs. Experts say the program will likely suffers cuts at some points, but it’s unclear how exactly spending will be reduced and how quickly those cuts will begin to affect providers.
Trump on Friday touted data that showed the US manufacturing sector added 10,000 jobs in February. He delivered remarks from the Oval Office, flanked by a bar chart displaying the estimated 10,000-job gain in comparison to 111,000 manufacturing jobs lost in the past 12 months of the Biden administration.
Trump attributed the February gains to his administration’s policies around trade, tariffs and plans to expand factory and manufacturing jobs in the US.
“They’ve been gearing up, they’ve had a little time,” he said of manufacturing employers. “It’s not just five weeks, it’s five weeks plus a few months. They put it into effect pretty quickly.”
Economists on Friday noted that the pickup in manufacturing and sectors such as construction were welcome signs for labor market stability and overall economic activity. However, the tick up in manufacturing jobs could also be a reflection of “some front-loading ahead of expected tariffs,” Michael Feroli, chief US economist at JP Morgan, noted Friday.
Signs of softness, restaurant job losses
The February jobs report painted a picture of a pretty solid and stable labor market, but one that also is exhibiting some softness:
The jobless rate ticked up, the labor force participation rate dipped; the employment-to-population ratio fell; average workweek hours dropped; the number of part-time workers for economic reasons increased; and the number of multiple jobholders was on the rise.
“It does suggest to me that some employers are cutting back on hours rather than cutting jobs outright, that that the demand for workers is fairly soft,” Julia Pollak, chief economist for employment site ZipRecruiter, told CNN in an interview.
However, that’s not the case in all industries. Leisure and hospitality businesses lost jobs for the second consecutive month, driven by cuts at restaurants and bars.
Restaurants lost 27,500 jobs in February, piling onto the 29,500 jobs lost in January (which was the biggest monthly hit since Covid times), BLS data shows.
Small businesses, especially those in food service, have struggled with the lingering effects of high inflation and especially high interest rates, she said.
“Restaurant jobs often serve as an entry point into the labor market, giving people a leg up,” she said. “The struggles of restaurants, it’s not a coincidence that they are accompanied by a decline in the participation rate. I think there are people on the sidelines who would be coming into work if that first rung of the ladder were strong.”
Consumer spending fell in January for the first time in nearly two years and saw the biggest monthly drop-off since February 2021, according to Commerce Department data released last week.
In a hiring ‘holding pattern’
The continued softness in the labor market leaves the economy with “little room for error as it braces for impact from an exodus of federal workers as well as potential trade-related job losses,” Noah Yosif, chief economist at the American Staffing Association, said in commentary Friday.
“The modest uptick in new opportunities in the labor market, coupled with significant downside risks for separations from is a flashing yellow light for the Fed as it refocuses on inflation, affirming that interest rates cannot stay higher for too long without consequences,” he said.
The churn that’s needed for a healthy labor market has slowed significantly in recent months. Businesses aren’t hiring as much, folks aren’t eager to quit, and those without jobs are staying on the sidelines for longer.
But even for businesses seeing strong revenue growth, the current political and economic climate is too volatile to allow for hiring.
That’s the case for Minneapolis, Minnesota-based Astropad, which sells hardware and software productivity tools for reading, writing and drawing, such as Rock Paper Pencil, a textured iPad screen protector coupled with a custom ballpoint Apple Pencil tip that replicates the sensation of writing and drawing on paper.
The company, founded in 2013 and boostrapped from the outset, has grown to about a dozen employees and notched a 40% sales gain last year. However, Astropad has had to hold off on adding more workers, because it is heavily exposed to the effects from higher tariffs.
It manufactures most of its hardware products in China, in part because the US supply chain for the products needed are limited or non-existent.
“One day, it’s tariffs on China; the next day, it’s tariffs on Canada and Mexico; and they’re off, and then they’re on again,” Matt Ronge, Astropad’s co-founder and chief executive officer, told us. “So, that really puts us in a holding pattern where we want to see what happens.”
