The U.S. economy lost jobs in February, a month marked by harsh winter and a strike at a major health care provider, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls fell by 92,000 for the month, compared with the estimate of 50,000 and below the downwardly revised total of 126,000 in January. February marked the third time in the past five months that payrolls fell, following a sharp revision showing a decline of 17,000 in December.
At the same time, the unemployment rate rose slightly to 4.4%, as employment fell in key areas. A broader measure of unemployment, which includes discouraged workers and those in part-time positions for economic reasons, fell, to 7.9%, 0.2 percentage points below the January level.
Health care, the main driver of payroll growth for at least a year, posted a loss of 28,000, largely due to a strike at Kaiser Permanente that sidelined more than 30,000 workers in Hawaii and California. Although the strike has since been resolved, it occurred during the BLS survey week and therefore decreased total employment.
Even though the employment situation was poor, wages increased more than expected. Average hourly wages rose 0.4% for the month and 3.8% from a year ago, both 0.1 percentage points above forecasts.
“I think it just tells us that the hope for a stabilization of the labor market may have been too high,” Mary Daly, president of the Federal Reserve Bank of San Francisco, told CNBC. “We also have above-target inflation and rising oil prices. How long that will last, we don’t know, but both of our targets are now risks and we need to keep our eyes on both.”
Information services, a sector hit by AI-related budget cuts, also lost 11,000 jobs, part of a 12-month trend in which the sector lost an average of 5,000 per month. The manufacturing sector recorded a loss of 12,000 people, despite tariffs aimed at relocating jobs abroad.
Federal public service employment also fell, by 10,000 for the month. President Donald Trump’s efforts to reduce federal payrolls have resulted in a decline of 330,000 jobs, or 11% of the total workforce, since October 2024, a few months before Trump took office, according to the BLS.
Transportation and warehousing saw a reduction of 11,000. Social assistance was one of the few sectors to show an increase, up 9,000. The weather-sensitive construction sector lost 11,000 people after a rise of 48,000 in January.
Long-term unemployment also increased, with an average unemployment duration of 25.7 weeks, the longest since December 2021.
Daly warned that labor market data was volatile.
“I don’t think you can go through this report, but I also don’t think you should make it more than a month’s worth of data,” she said.
The report comes amid a crosscurrent of economic signals.
Jefferies economist Thomas Simons called February’s wage decline “a perfect storm of temporary difficulties that came together in the wake of an above-trend reading in January.”
“Considering the sectors affected by the bad weather and the strike, which ended on February 23, the employment figures remain poor,” added Simons. “We don’t think this is a harbinger of a gradual deterioration in employment numbers going forward, but the risk of a slowdown has certainly increased.”
Although job creation has been difficult to come by, layoffs have also been fairly moderate, with a few notable exceptions.
Inflation has moderated, but the recent surge in gas prices following fighting in the Middle East has raised questions about a further rise.
Elsewhere, economic growth has been strong, with reports this week showing that the services and manufacturing sectors are expanding. Consumers have held up relatively well, although there are growing signs that most spending is being done by those with higher incomes.
White House economic adviser Kevin Hassett said average payroll growth in recent months was consistent with the trend given the White House’s efforts against illegal immigration. The economy has created an average of fewer than 5,000 new jobs per month since Trump took office in January 2025.
“On average, that’s about what we would expect, because immigration has fallen so much that the break-even point is probably around 30,000 or 40,000 jobs per month,” the director of the National Economic Council said on CNBC. “I think it fits with everything we’re seeing, which is that the economy is really strong.”
Federal Reserve officials therefore took a cautious approach to policymaking following a series of interest rate cuts. Most central bankers have advocated a wait-and-see approach as they monitor both the impact of rate cuts and geopolitical factors such as tariffs and the war in Iran.
Following the jobs report, traders moved up their expectations for the next cut to July and forecast a greater chance of two cuts before the end of the year, according to the CME Group. FedWatch futures market price indicator.
Fed Governor Christopher Waller said earlier in the morning that a poor jobs report could affect his policy. Waller is part of the minority of members of the Federal Open Market Committee who are calling for cuts soon.
“If we get a bad number, the January number will be revised down to a very low number… the question is, why are you sitting idly by? So I could definitely see this meeting going in a different direction, depending on this week’s data and [how] THE [consumer price index] next week is coming,” Waller said on Bloomberg News.
The household survey, used to calculate the unemployment rate, showed an even bleaker economic situation. This part of the report showed a drop of 185,000 in the number of people reporting work and an increase of 203,000 in the unemployment level. The activity rate fell slightly to 62%, its lowest since December 2021.