The U.S. economy lost jobs in February, a month marred by severe winter weather and strikes at major health care providers, the Bureau of Labor Statistics reported Friday.
The number of non-farm payrolls for the month was 92,000 fewer than the expected 50,000, and below the downwardly revised January total of 126,000. February’s payroll decline was the third in the past five months, following a sharp revision in December that showed a decline of 17,000 jobs.
At the same time, the unemployment rate rose slightly to 4.4% as employment fell across major regions. The broader unemployment rate, which includes discouraged workers and those in part-time jobs for financial reasons, fell to 7.9%, 0.2 percentage points below January’s level.
The health care sector, which has been the main driver of employment growth for at least the past year, lost 28,000 jobs, largely due to the Kaiser Permanente strike that laid off more than 30,000 workers in Hawaii and California. Although the strike was later resolved, it was subtracted from employment totals because it occurred during the BLS survey week.
While the employment situation remained sluggish, wages rose more than expected. The average hourly wage increased by 0.4% from the previous month and by 3.8% from the previous year, both of which exceeded expectations by 0.1 percentage point.
“I think it just shows that expectations of a stable labor market may have been overblown,” San Francisco Fed President Mary Daly told CNBC. “Also, inflation is above target and oil prices are rising. We don’t know how long that will last, but both targets are risks at the moment and we have to keep an eye on both.”
The information services sector, which has been affected by artificial intelligence-related job cuts, also lost jobs, with the sector dropping by 11,000 jobs as part of a 12-month trend of average job losses of 5,000 per month. Despite the tariffs aimed at bringing jobs back home, the manufacturing industry lost 12,000 jobs.
The number of federal government employees also decreased, falling below 10,000 in the same month. According to the BLS, President Donald Trump’s efforts to cut federal employee pay have resulted in the loss of 330,000 jobs, or 11% of the total workforce, since October 2024, months before Trump took office.
Transport and warehousing jobs fell by 11,000. Social assistance was one of the few sectors to record an increase of 9,000 people. The construction industry, which is sensitive to weather, fell by 11,000 jobs after increasing by 48,000 in January.
The long-term unemployment rate also surged, with the average length of unemployment now at 25.7 weeks, the longest since December 2021.
Mr Daly warned that labor market data was volatile.
“I don’t think you can read this report, but I also don’t think you should use it for more than a month’s worth of data,” she says.
The report was released amid a wave of economic data.
Jefferies economist Thomas Simmons called February’s payroll decline “a perfect storm of January’s above-trend numbers followed by a temporary drag.”
“If you look at the sectors affected by the weather and the strike that ended on February 23rd, we still have bad employment numbers,” Simmons added. “While we don’t believe this portends increasingly worse employment numbers, the risk of a recession is certainly increasing.”
Although employment growth has been difficult, layoffs have been largely contained, with some notable exceptions.
Inflation has been moderate, but recent spikes in gasoline prices due to fighting in the Middle East have raised questions about whether they will rise further.
Economic growth is also strong elsewhere, with reports this week showing expansion in both the services and manufacturing sectors. Consumers are holding on pretty well, but there are increasing signs that most of the spending is being done by high-income earners.
White House economic adviser Kevin Hassett said average job growth over the past few months is consistent with trends, given the White House’s efforts against illegal immigration.
“On average, it’s going to be about what we expected because we’re going to see a significant drop in immigration and the break-even unemployment rate will probably be around 30,000 or 40,000 people a month,” the National Economic Council director told CNBC. “I think this is consistent with everything we’re seeing, which is that the economy is doing very well.”
As a result, Fed officials are taking a cautious approach to policymaking following a series of interest rate cuts. Most central bankers are advocating a wait-and-see approach, watching both the impact of rate cuts and geopolitical factors such as tariffs and the Iran war.
The jobs report prompted traders to bring forward their expectations for the next round of cuts to July, pricing in the possibility of two cuts before the end of the year, according to CME Group’s FedWatch futures market price gauge.
Fed Director Christopher Waller said in the morning that weak jobs data could influence policy. Waller is in the minority of members of the Federal Open Market Committee who advocate early cuts.
“If we get a bad number, the January numbers will be revised down to a very low number…The question is, why are we holding back? So depending on this week’s data and how the (consumer price index) goes next week, it’s certainly possible that this meeting could go in a different direction,” Waller said on Bloomberg News.
The household survey, which is used to calculate the unemployment rate, showed that economic conditions have worsened further. That part of the report shows that the number of people reporting being employed fell by 185,000 and the unemployment rate rose by 203,000. The labor force participation rate fell slightly to 62%, the lowest level since December 2021.
