February Jobs Report Key Stats
- Total nonfarm payrolls rose by 151,000 in February vs. 125,000 in January.
- The unemployment rate ticked up to 4.1% in February from 4.0% in January.
- Average hourly wages rose by 0.3% to $35.93 after rising 0.4% in January.
The US economy continued to generate new jobs at a healthy pace in February, according to the latest monthly jobs report. However, with tariffs and federal job cuts, the outlook is less clear than usual.
The US economy added 151,000 jobs in February, according to the latest report from the Bureau of Labor Statistics. Meanwhile, the unemployment rate ticked up to 4.1% from 4.0% in January.
Both key readings were on the softer side. Nonfarm payroll employment had been forecast to rise 160,000 vs. an originally reported 143,000 increase in January, according to FactSet. That gain was revised down to 125,000. Meanwhile, the unemployment rate had been forecast to remain steady at 4%.
“Job growth is holding steady, but headwinds are building,” says Morningstar senior US economist Preston Caldwell. Against this backdrop, Federal Reserve interest-rate cuts are seen as being on hold.
Monthly Payroll Change
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Caldwell notes that nonfarm payroll employment grew at a 1.5% annualized pace in the three months ending February 2025. That’s down slightly from January’s 1.8% pace. February was “still a solid result.”
Federal Job Cuts and Tariff Impact Yet to be Felt
However, the jobs report data does not capture any impact on hiring from President Donald Trump’s whipsawing tariff policies concerning the country’s biggest trading partners, or his efforts to slash the federal workforce.
“The BLS’ surveys have likely yet to register more than a sliver of the full impact from federal government layoff,” Caldwell says. “That should change in next month’s job report.” He notes that Challenger recently tallied federal job cuts at 62,000, and another 75,000 have reportedly accepted buyouts.
“Additionally, economic growth may now be trending down,” Caldwell explains. He notes that the Atlanta Fed GDPNow projection for a 2.4% decline in real gross domestic product in the first quarter of 2025 is driven by a temporary surge in imports. “But the more stable components of GDP, consumption and investment, also appear to be decelerating. If this persists, given heightened policy uncertainty from tariffs, private employers will likely pare back hiring.”
Fed Rate Cuts On Hold
A March interest-rate cut was already unlikely, and Caldwell believes Friday’s jobs report is unlikely to move the needle for the central bank. “For now, the job market remains in balance, sending no strong signal for the Fed to either cut or hold firm,” he says.
For now, other forces weighing on the economic outlook will likely take precedence for central bankers. “The Fed has much more on its mind—namely, gauging whether the inflation data continues to reflect convergence to the 2% target and anticipating any inflationary impact from tariff hikes,” Caldwell says. Core PCE inflation (the Fed’s preferred measure of price pressure, which excludes volatile food and energy costs) came in at 2.6% annually in January. That’s significantly lower than its 2022 peak, but still higher than the central bank’s goal. Meanwhile, the outlook for tariffs continues to evolve.
On Friday, investors gained confidence that the Fed will continue its pause in March, according to the CME FedWatch Tool. Bond futures markets now see a 97% chance that the central bank will hold rates steady at their current range of 4.25%-4.50% at its March meeting, up from 88% odds a day earlier.
Federal-Funds Rate Target Expectations for March 19, 2025 Meeting
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