United States: Labour Market Stumbles in February

The February labour market data delivered an unexpected result. While consensus expectations were calling for a monthly gain of roughly 60,000 workers, the US economy instead shed 92,000 positions. Since the start of 2025, February marks the sixth month of employment declines (and the fifth within the private sector). Revisions to earlier months also added another episode of contraction: the previously reported 48,000-job increase in December is now shown as a 17,000-job loss.

February’s pullback in employment stems in part from a sector that rarely signals weakness: health care. After adding 116,400 jobs in January, the sector recorded a decline of 18,600 positions—a first contraction since January 2022. It is important to note that labour disputes, particularly in New York and California, were the primary drivers of this sudden drop. In both cases, the disputes concluded in February, but only after the reference week for the survey. As a result, a rebound should emerge in the March data, allowing the sector to resume its traditional role as a growth engine.

That said, February’s weakness was not limited to health care. Only 50.8% of the 250 tracked industries posted employment gains last month. Net job losses were observed in manufacturing, construction, transportation, business services, private education, information, and food services. Bad weather across several US regions at the end of January and early February likely contributed to this soft patch. Trade policy uncertainty and the impact of increased use of artificial intelligence may also have weighed on hiring in certain industries.

Despite February’s decline, other labour market indicators paint a more stable picture. Initial jobless claims remain relatively steady, and weekly ADP data have performed reasonably well since January. As such, it is difficult to interpret last month’s setback as the start of a more entrenched downward trend. Nonetheless, underlying conditions remain soft: the three‑month average of private‑sector job creation (53,000 between December and February) is far weaker than a year earlier (176,000). This assessment does not yet account for the potential effects of the war in Iran and its impact on energy prices. With the conflict less than a week old, it will take time to determine whether household and business confidence—and ultimately the labour market and the broader economy—will be affected.

After a strong January, the US labour market disappointed in February. The decline in employment was an unwelcome surprise. While some specific and temporary factors explain part of the drop, overall labour market momentum remains subdued. Attention will now turn to whether disruptions stemming from the war in Iran further weigh on economic conditions. Implications for monetary policy are not straightforward. Federal Reserve policymakers remain concerned about inflation—pressures that could intensify should energy prices continue to rise. For now, we maintain our view that the Fed will stay on hold.