February job market about as expected – modest gains.
Nonfarm payrolls increased by 151,000 in February, a tad below market expectations of around 160,000 for the month. Revisions to the prior two months were minimal. The U-3 unemployment rate edged higher to 4.1 percent – the middle of its recent range (and still low historically). Gains in average hourly earnings, up by 0.3 percent for the month and 4.0 percent over the past year, were exactly as expected.
There is little indication that President Trump’s policy moves with regard to tariffs and government employment had a meaningful impact on the job market for February. Instead, the February employment report shows that the job market continues to slow at a glacial pace. Moreover, the solid (if slowing) job gains over the first two months of the first quarter are not consistent with start of a recession – as suggested by the Atlanta Fed’s most recent GDPNow estimate for 2025Q1 real GDP growth of -2.4 percent.
While today’s employment figures may be positive for financial markets, the data are already several weeks old and much has happened since then. Increased tariffs, especially if other countries retaliate with increased tariffs of their own, have increased the near-term odds of a downturn – but at this point our baseline view continues to be that the economy will grow, but probably at a slower pace. First quarter growth will almost certainly be much slower as a result of trade volatility and perhaps by slower government spending. To the extent that slower federal government spending reduces future budget deficits, that should be a longer-term positive – but at the cost of slower growth in the near term.
Today’s employment report reinforces the notion that the Fed will keep monetary policy unchanged at its March FOMC meeting. Beyond that, the Fed will be looking at inflation and economic growth figures to determine future policy, But for now, the modest-to-solid job gains in recent months suggest that the Fed can remain on the sidelines.
David W. Berson, Ph.D., CBE
Chief US Economist
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