The US economy added 151,000 jobs in February, falling short of expectations, while the unemployment rate ticked up to 4.1% from 4.0%, according to the Labor Department’s report released on Friday (March 7). This follows January’s revised job gain of 125,000, which was impacted by severe weather.
Impact of Trump’s federal job cuts
The latest report provides the first full snapshot of the labor market since President Donald Trump returned to office in January. His administration has launched aggressive cost-cutting measures, led by billionaire adviser Elon Musk and the Department of Government Efficiency (DOGE). These efforts have resulted in thousands of federal job cuts, prompting lawsuits and uncertainty across agencies.
“Within government, federal government employment declined by 10,000 in February,” the Labor Department noted.
However, economists believe the full impact of federal workforce reductions is not yet reflected in the February data, as the survey was likely conducted too early in the month. “We expect a more visible dent to federal payrolls in March and subsequent months with federal employment likely to see moderate monthly declines,” said EY senior economist Lydia Boussour.
Private sector layoffs on the rise
While government jobs declined, analysts warn of cracks emerging in the broader labor market. A report from Challenger, Gray & Christmas highlighted tens of thousands of job cuts in both the public and private sectors, particularly in retail and consumer products.
Pantheon Macroeconomics noted that these layoffs could be linked to “heightened uncertainty around trade policy” as businesses react to economic shifts.
Trump’s tariffs create economic uncertainty
Another factor contributing to labor market concerns is Trump’s steep tariff increases on imports from Canada and Mexico, which took effect on Tuesday (March 4). The move initially sparked financial market jitters before the administration moderated their scope.
“Steep tariff increases could cause adjustments in business decisions with knock-on effects on hiring and wages as business leaders navigate higher input costs and retaliatory measures,” Boussour cautioned.
Wage growth slows
The Labor Department report also showed that wage growth cooled from January to February, rising 0.3% month-over-month. However, compared to a year ago, earnings were still up 4.0%.
(With AFP inputs)
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