The job market is at a standstill
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Friday's jobs report snaps back to the reality of a labor market at a standstill, with little, if any, net job creation.
Why it matters: Even before the potential for fresh economic turbulence from the Iran war, the labor market has been on weak footing from other factors — AI adoption, trade chaos, immigration crackdowns.
- The apparent blockbuster jobs gains in January now look to have been a head fake.
"This is a conundrum: Just when it looked like the labor market was stabilizing, this report delivers a knock-down blow to that view," Fitch Ratings economist Olu Sonola wrote in a client note.
- Sonola said the "head-spinning" report darkens the economic outlook against a backdrop of "renewed tariff noise, higher energy prices and fresh inflationary impulses."
By the numbers: The economy shed 92,000 jobs in February, the biggest jobs bust since October.
- Hiring at the end of 2025 was also sharply worse than initially reported. Employment fell by 17,000, a sharp reversal from the most recent estimate of 48,000 jobs added. Job gains in January were revised down slightly.
- All told, employers added only 6,000 jobs a month over the last three months (in line with the 10,000 jobs a month added in 2025), essentially flatlining in an economy with 158 million jobs.
- The jobless rate ticked up to 4.4% in February as more workers joined the ranks of the unemployed.
Of note: Separately, Census data also released this morning showed that consumers cut spending in January, with retail sales falling 0.2% after a flat month in December.
The big picture: It's true that the February jobs figure might have been negatively impacted by one-off factors, including a now-ended strike at Kaiser Permanente that took out 28,000 jobs in health care — the most since April 2025.
- That is almost certain to be reversed in the March jobs report, but it underscores the peril of the ultra-concentrated hiring in recent years. The health care sector has been the engine of jobs growth. If that falters, other sectors might be too weak to pick up the slack.
- The monthslong trend of weak hiring, except in January, now looks more intact.
Manufacturing, a politically important sector that President Trump has promised his trade agenda would revive, returned to shedding mode.
- Manufacturers cut 12,000 jobs last month, a sign that January's gains — the first for the sector since late 2024 — might have been a blip.
The bottom line: A labor market that appeared to be firming up now suggests the opposite, with new geopolitical uncertainties presenting a fresh test for the U.S. economy.
- If it continues — or gets worse — it could deepen voters' dissatisfaction with the economy ahead of midterm elections later this year.
