Job Market Remains Resilient Despite Uncertainty, Adding 151,000 Jobs in February

The U.S. economy continues to show signs of resilience, with employers adding a solid 151,000 jobs last month. However, the outlook remains cloudy due to various factors, including President Donald Trump's threats of a trade war, purging of the federal workforce, and promises to deport millions of immigrants.

According to the Labor Department's report on Friday, hiring was up from a revised 125,000 in January, but economists had expected 160,000 new jobs last month. While this may seem like a modest increase, it is essential to note that the job market has cooled significantly since its peak in 2021.

The unemployment rate rose slightly to 4.1%, as the number of jobless Americans increased by 203,000. This rise in unemployment can be attributed to several factors, including the federal government's layoffs and the reduction in hiring in various sectors such as restaurants and bars.

Economists are still trying to make sense of these numbers and their implications for the economy. Sarah House, senior economist at Wells Fargo, stated that "the labor market continues to hold up, but we're still a far cry from where we were a year or two years ago." She expects hiring to slow and unemployment to creep higher as Trump's policies take effect.

One of the key concerns is the impact of Trump's federal spending cuts on the private sector. House believes that these cuts will "spill over into the private sector, hitting contractors and nonprofits" and potentially leading to a slowdown in hiring. Additionally, the ongoing trade war with America's trading partners poses another threat to the labor market.

The economy's strong recovery from the pandemic recession of 2020 led to an inflationary surge that peaked in June 2022, when prices rose by 9.1% compared to the previous year. In response, the Federal Reserve raised its benchmark interest rate 11 times between 2022 and 2023, taking it to the highest level in over two decades.

Despite this, the economy has remained resilient, thanks to strong consumer spending, big productivity gains at businesses, and an influx of immigrants who helped ease labor shortages. Employers added a decent average of 168,000 jobs per month last year, but that was down from 216,000 in 2023, 380,000 in 2022, and a record 603,000 in 2021.

Inflation has cooled since then, dropping to 2.4% in September, allowing the Fed to reverse course and cut rates three times in 2024. However, progress on inflation has stalled since summer, and the Fed has held off from cutting rates further.

Average hourly earnings rose 0.3% last month, down from a 0.4% increase in January. While this may seem like a modest gain, it is essential to note that wages have been growing steadily over the past year, with average hourly earnings increasing by 5.1% since February 2023.

Fed officials will likely view these numbers as supporting their current wait-and-see approach toward interest-rate cuts. With inflation still slightly above the Fed's 2% target, several officials have made clear in recent remarks that they would like to see more progress before cutting their benchmark rate further.

Steady hiring and an expanding economy make it easier for the Fed to stay on the sidelines. However, if companies start laying off workers and the unemployment rate rises, pressure could increase on the Fed to cut rates.

Some businesses are already feeling the effects of Trump's policies. Rick Gillespie, chief commercial officer at Revive Environmental Technology LLC, said he is bullish about the prospects for the environmental contamination mitigation and water treatment company despite the uncertain economy.

Revive plans to add 10-20 workers in Columbus, Ohio, and Grand Rapids, Michigan, over the next few months. However, others are seeing a shakeout in the economy. Sheela Mohan-Peterson, who owns a franchise of the Patrice & Associates recruiting firm, said she's starting to get more resumes from top-level executives who worked at biotech and high-tech companies.

Mohan-Peterson believes this is fallout from the chaotic federal spending cuts. "Especially startups, they do depend on federal grants to get going, and they're starting to see those disappear or threaten to disappear," she said. "They're starting to get rid of their high-paid executives so that they can save some money because they can't count on those grants."

Impact of Trade War and Federal Spending Cuts on the Labor Market

The ongoing trade war with America's trading partners is another threat to the labor market. The trade war has led to higher tariffs, which have increased costs for businesses and made it more challenging for them to hire workers.

Additionally, Trump's federal spending cuts are having a significant impact on the private sector. House believes that these cuts will "spill over into the private sector, hitting contractors and nonprofits" and potentially leading to a slowdown in hiring.

The labor market is also facing challenges from within. The reduction in hiring in various sectors such as restaurants and bars is a concern for economists. Restaurants and bars cut nearly 28,000 jobs last month on top of a loss of almost 30,000 in January.

Impact of Immigration on the Labor Market

Immigration has played a significant role in easing labor shortages in the United States. However, Trump's promises to deport millions of immigrants have raised concerns about the impact on the labor market.

Economists believe that immigration will continue to be essential for the U.S. economy, particularly in sectors such as agriculture and construction. The reduction in immigration could lead to a shortage of workers in these industries, which would have a significant impact on the labor market.

Conclusion

The job market remains resilient despite uncertainty, adding 151,000 jobs last month. However, the outlook is cloudy due to various factors, including President Donald Trump's threats of a trade war, purging of the federal workforce, and promises to deport millions of immigrants.

Economists are still trying to make sense of these numbers and their implications for the economy. They believe that hiring will slow and unemployment will creep higher as Trump's policies take effect.

The impact of the trade war and federal spending cuts on the labor market is a significant concern for economists. The ongoing trade war with America's trading partners has led to higher tariffs, which have increased costs for businesses and made it more challenging for them to hire workers.

Additionally, the reduction in immigration could lead to a shortage of workers in sectors such as agriculture and construction, which would have a significant impact on the labor market.

The economy remains resilient, thanks to strong consumer spending, big productivity gains at businesses, and an influx of immigrants who helped ease labor shortages. Employers added a decent average of 168,000 jobs per month last year, but that was down from 216,000 in 2023, 380,000 in 2022, and a record 603,000 in 2021.

Inflation has cooled since then, dropping to 2.4% in September, allowing the Fed to reverse course and cut rates three times in 2024. However, progress on inflation has stalled since summer, and the Fed has held off from cutting rates further.

The job market remains resilient despite uncertainty, but it is essential for economists and policymakers to continue monitoring these numbers and their implications for the economy.