The US Job Market Holds Up in February

After all the recent turmoil and the release of decidedly less positive data for a number of economic indicators, relatively decent employment growth came as a bit of a relief. It was a larger uptick than we saw in January, but still below the much stronger, but unsustainable, gains observed in December (+323,000) and November (+261,000).

The same holds true for the share of the 250 industries surveyed that reported an increase in their workforce. That figure fell from 60.8% in December to 52.4% in January before climbing back up to 58.4% last month. In particular, job numbers improved in construction and manufacturing, especially in the automotive sector. Private services saw declines in retail trade, food services and temporary help services.

And what about the public sector? Donald Trump’s arrival in the White House and the government downsizing led by Elon Musk have obviously raised some concerns about jobs in the public sector. We can already see the effects. In February, there were 6,700 fewer jobs in the federal government (excluding the postal service, where 3,500 jobs were lost). This is the steepest drop since June 2022. That said, it’s still just a 0.3% decline. It’s also worth mentioning that job gains (+21,000) at other levels of government more than offset these losses. While there’s still a lot of uncertainty about how DOGE actually operates, it’s likely that job losses will increase in the coming months. Layoff announcements surged in February, according to data from Challenger, Gray & Christmas, and unemployment claims submitted by federal employees continue to rise. In addition, we probably won’t see the impact of deferred resignations under the federal buyout plan until September. All of this will need to be closely monitored.

Rising unemployment in February isn’t much of a concern, as it merely went back to where it was in December. At 4.1%, unemployment is relatively low and shows that the job market is still a bit tight. That said, the change in employment (-588,000) reported by the household survey once again diverged from the establishment survey data (+150,000). But we need to keep in mind that household survey jobs data is highly volatile.

Job creation was good but not great in February, which is more or less in line with the consensus forecast. All the uncertainty created by the Trump administration’s policies, especially the president’s flip-flopping on tariffs, could further erode hiring intentions and even employment. But it’s clear that things haven’t gotten so bad that Fed officials will return to cutting interest rates anytime soon, especially in an environment where inflation has proven stubborn and could resurge under the White House’s protectionist policies.