US employment growth continued in February despite emerging headwinds from federal government workforce reductions and policy uncertainties. The economy added 151,000 jobs during the month, surpassing the prior month’s adjusted gain of 125,000 positions. The unemployment rate held steady at 4.1%, marginally above the previous month’s 4% level. Economists had anticipated a larger addition of 170,000 positions.
Federal employment declined by 10,000 jobs in February, but this reduction was partially offset by gains in healthcare, financial activities, transportation and warehousing, and social assistance sectors. The employment data was collected during the second week of February, meaning the full effects of subsequent federal workforce reductions have not yet appeared in official statistics. Analysts noted that larger federal employment impacts are expected to become visible in coming reports.
Other labor market indicators released earlier in the week suggested softer conditions. The payroll processor ADP reported 77,000 new hires in February, representing roughly half the anticipated figure. The outplacement firm Challenger, Gray & Christmas documented 172,017 announced job cuts by US employers in February, marking the highest monthly total since July 2020. Federal agencies accounted for more than 62,000 of these cuts across 17 different departments, compared with 151 federal cuts announced in February 2024.
Economists cautioned that the full impact of recent policy developments remains uncertain. Mass federal workforce reductions stemming from proposed efficiency initiatives and tariffs placed on trading partners may take additional time to materialize in employment data. Consumer confidence declined notably in February, posting its largest month-to-month drop in nearly four years, while financial market confidence also weakened following tariff announcements.
Federal Reserve policymakers will convene on 18 and 19 March to assess interest rate decisions. Current benchmark rates stand at 4.25% to 4.5% following three reductions in the fall. The Fed maintained rates at its January meeting, citing inflation above its 2% target, with January inflation reaching 3%.
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