February jobs report: A temporary slowdown or the start of a trend?
The US labor market is expected to show signs of strain in February, with job growth slowing amid a mix of fiscal constraints, weather disruptions, and policy shifts. Market participants will be closely watching whether this is a temporary dip or the beginning of a prolonged slowdown.
Key expectations for February’s jobs report
Some economists anticipate that nonfarm payrolls will increase by approximately 65,000, significantly lower than January’s 143,000 and well below the consensus estimate of 160,000. Private-sector job gains are also expected to decelerate, with growth projected at 61,000 compared to 111,000 in the previous month.
This slowdown is driven by several factors:
- Impact of fiscal policy and government spending cuts
The expiration of pandemic-era fiscal support has created a financial strain on state and local governments.
A temporary federal funding freeze has added further uncertainty, leading to potential hiring delays.
The Department of Government Efficiency (DOGE) layoffs and federal contract cancellations are expected to weigh on employment in the coming months.
- Adverse weather conditions
Severe winter storms in January reduced payrolls, particularly in the Southern US states. February saw additional storms affecting major economic hubs, including New York and Chicago, leading to an estimated 60,000-job drag across industries such as construction, leisure and hospitality, and retail. Without these weather-related disruptions, private payroll growth could have been closer to 120,000.
- Weakness in the education sector
February is historically a strong month for hiring in education, which typically accounts for 60-70% of total hiring. However, a combination of expired federal funding and hiring freezes has led to a significant slowdown. Public-sector education hiring is projected to drag government employment down by 28,000, while the private education sector could see a loss of 18,000 jobs.
Outlook for March and beyond
While February’s job numbers may appear weak, there are reasons to expect a rebound in March. The resolution of temporary hiring freezes and a possible bounce-back from weather-related job losses could support stronger payroll growth. However, ongoing government layoffs and rising economic uncertainty could offset these gains.
Additionally, the Federal Reserve remains a key player in this evolving economic landscape. With job growth below the estimated breakeven level of 105,000, the unemployment rate is likely to edge up to 4.1% from 4.0% in January. If this trend continues, the Fed may be compelled to implement rate cuts totaling 75 basis points this year.
Final thoughts
While February’s job report may show weakness, it is important to assess whether this is a temporary setback or the start of a more persistent decline. The interplay of fiscal policy, economic uncertainty, and external disruptions will determine whether hiring rebounds in the months ahead. Investors and businesses should remain attentive to March’s employment data, as it will provide further clarity on the direction of the labor market.
Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.
Disclaimer
This is a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. The information contained herein does not constitute a personal recommendation and does not consider your personal investment objectives, investment strategies, financial situation or needs. Squared Financial makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on a recommendation, forecast, or other information supplied by Squared Financial.
The information on this site is not intended for any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
