With financial markets already under pressure from the ongoing conflict in the Middle East, the situation isn’t getting any easier for American jobs.

Just when the US economy thought the labor market was gaining momentum after the previous report, the latest data pulled fears of labor market weakness back into the picture.

The February labor market report showed significant job losses in both the public and private sectors, raising further concerns about the health of the economy. The decline was driven by a mix of bad weather, a major workers’ strike, and broader economic pressures that have been building for months.

A Worse-Than-Expected Jobs Report

Nonfarm payrolls showed job losses of 92,000 in February, coming in way below its forecast of 58,000 additional jobs, with January’s numbers also revised down to 126,000 jobs. The unemployment rate also ticked up 0.1% to 4.4%, while the labor force participation rate dropped to 62%, reaching its lowest level since December 2021. ⁽¹⁾ 

Average hourly earnings rose 0.4% MoM and 3.8% YoY, coming in above their forecasts. Solid wage growth is seen as a positive sign for consumer spending, though rising gas prices linked to conflict in the Middle East could eat into those gains. ⁽²⁾

What Drove the Job Losses

The labor market was hit by several factors simultaneously. A workers’ strike at Kaiser Permanente, one of America’s leading healthcare providers and nonprofit health plans, removed more than 30,000 healthcare workers from payrolls. ⁽³⁾

Bad winter weather also brought trouble to the jobs market. Construction lost 11,000 jobs after gaining 48,000 jobs in January. Transportation and warehousing fell by 11,000, and leisure and hospitality were similarly affected by the cold. ⁽⁴⁾

Other sectors also struggled. Manufacturing lost 12,000 jobs despite tariffs designed to bring factory jobs back to the US. Information services dropped 11,000, continuing a year-long trend tied to cuts linked to artificial intelligence. Federal government employment fell by 10,000, part of a larger slide of 330,000 federal jobs since October 2024. ⁽⁵⁾

What Economists and Officials Are Saying

Economists were careful not to read too much into a single month of data. San Francisco Fed President Mary Daly struck a cautious note. She said the report showed that hopes for a stabilizing labor market may have been premature, and that both inflation and employment were now areas of concern for policymakers. ⁽⁶⁾

White House economic advisor Kevin Hassett pushed back on the negative reading, arguing that slower immigration had lowered the number of jobs needed to keep unemployment steady, and that the overall economy remained strong. ⁽⁷⁾

What This Means for the Federal Reserve

Following the payrolls report, traders are now pricing in a June rate cut with around 34.5% probability after the jobs data, and a 40.7% probability in July. Fed officials remain on standby, by monitoring tariff effects and the conflict in the Middle East, both of which are driving oil prices up. The Fed is expected to hold rates steady at its upcoming March 17-18 meeting.

Fed Governor Christopher Waller, one of the few voices pushing for cuts soon, noted earlier in the day that a weak jobs report could influence the Fed’s next steps. ⁽⁸⁾

The Bigger Picture

The February jobs report arrived at a difficult moment for the US economy. While growth in the services and manufacturing sectors has been solid, and consumer spending has held up, there are growing signs of strain.

Most spending appears to be concentrated among higher-income households, and uncertainty around trade policy continues to weigh on businesses.

For now, economists say the risks of a more serious slowdown have grown, even if a sharp downturn is not yet the base case.

Sources: ⁽¹⁾ ⁽²⁾ ⁽³⁾ ⁽⁴⁾ ⁽⁵⁾ CNBC, ⁽⁶⁾ ⁽⁷⁾ ⁽⁸⁾ ⁽⁹⁾ Reuters