Ioana Dorhoi, PhD – Government Relations and Public Affairs

By Ioana Monica Dorhoi, PhD

March 7, 2025

The U.S. labor market added 151,000 jobs in February, missing economists’ forecasts and signaling a potential slowdown in hiring as economic growth shows signs of easing. While the job market has remained resilient in early 2025, February’s numbers suggest a cooling trend that could influence future monetary policy decisions.

Hiring Falls Below Expectations

Economists had predicted a gain of 160,000 jobs for February, according to a survey by FactSet. However, actual job growth fell short of that target. Meanwhile, the unemployment rate ticked up slightly to 4.1%, just above the 4% estimate. This marks a shift from the robust hiring seen in December, when the economy added a remarkable 323,000 jobs.

Despite the slowdown, the labor market has continued to show relative strength in the face of economic uncertainty. However, analysts warn that deteriorating hiring indicators, such as reduced job listings and a decline in temporary staffing, suggest a more significant slowdown may be on the horizon.

Impact of Government Job Cuts

One of the key factors influencing February’s job numbers is the wave of layoffs hitting the government sector. Federal employment declined by 10,000 last month, a figure that does not fully capture the broader impact of ongoing job cuts at the federal level. According to Andy Stettner, an unemployment insurance expert at The Century Foundation, unemployment claims from federal workers often take weeks to appear in official government reports.

Additionally, layoffs surged to their highest levels since 2020, with more than 172,000 job cuts announced in February—a 245% increase from the previous month. These layoffs were largely driven by reductions in federal positions ordered by Elon Musk’s Department of Government Efficiency (DOGE), according to outplacement firm Challenger, Gray & Christmas. This marks the highest monthly layoff total since July 2020, when 263,000 job cuts were announced.

What It Means for the Federal Reserve

The weaker-than-expected jobs report may influence the Federal Reserve’s stance on interest rates. In January, the Fed paused its rate-cutting cycle due to persistent inflation concerns. However, Fed Chair Jerome Powell has indicated that labor market conditions remain a key factor in determining future monetary policy moves.

Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, noted that February’s jobs report could increase momentum for a resumption of interest rate cuts. “The payrolls growth surprised slightly to the downside, and the unemployment rate ticked up, justifying the momentum that’s been building for a resumption in the Fed’s cutting cycle,” Rosner explained.

Although only one in ten economists polled by FactSet expect the Fed to cut rates at its next meeting on March 19, nearly half anticipate a rate reduction at the subsequent meeting in May. With hiring slowing and layoffs mounting, pressure could build for the Fed to act sooner rather than later.

Looking Ahead

February’s job data highlights a turning point in the labor market, with hiring slowing and layoffs accelerating. While the economy continues to add jobs, the pace has decelerated, raising concerns about broader economic stability. As the Federal Reserve weighs its next steps, all eyes will be on future job reports to determine whether this slowdown is temporary or a sign of deeper economic weakness.