Employment Data Signals Economic Uncertainty Ahead of February Report

Policy uncertainty and significant job cuts in Washington are raising concerns about the stability of the U.S. economy, according to traders and analysts. As fresh employment statistics approach, they will shed light on how these factors are affecting the job market so far.

The Bureau of Labor Statistics is set to unveil its monthly employment report for February at 8:30 a.m. ET on Friday. Experts predict that around 170,000 new payrolls were added last month, a rise from the 143,000 job additions seen in January. The unemployment rate is forecast to remain steady at 4%, a level that is historically low.

Just under two months into office, President Donald Trump’s new administration has created a cloud of uncertainty over the robust economy it took over. The administration has proposed major changes in economic policies to address widespread dissatisfaction among voters.

Recently, consumer confidence has dipped, as households are shifting their focus from spending to saving. The uncertainty surrounding Trump's tariff policies and the vast job cuts proposed by billionaire advisor Elon Musk's Department of Government Efficiency are causing fears of rising unemployment and prices, leading to discussions about potential stagflation.

The Bureau of Labor Statistics data may not yet fully reflect these developments, as the survey period for the February report covers only the first two weeks of the month. This could explain why Wells Fargo Senior Economist Sarah House believes the numbers will appear relatively strong, additionally supported by improved weather conditions compared to January, which had negatively impacted job growth. However, House cautions that the outlook could change swiftly.

“We are likely to encounter some challenges as the year progresses,” House stated. “It’s not only tariffs that we’re dealing with, but also a slowdown in immigration, which will influence labor force growth. Furthermore, there are aggressive initiatives aimed at reducing government spending.”

Leading up to the February BLS numbers, two unofficial reports indicated that the job market is showing signs of slowing down: Job-cut announcements last month reached the highest levels seen since the pandemic's darkest days in mid-2020, according to consultancy Challenger, Gray & Christmas.

The private-sector payroll processor ADP reported a net increase of 77,000 jobs for February, significantly below the anticipated 148,000. This decline was impacted by layoffs in the technology sector and losses in education and health services, which often depend on federal funding, highlighted ADP Chief Economist Nela Richardson during a press briefing.

“With policies being evaluated and interpreted, there’s some uncertainty emerging,” Richardson noted, referring to the potential cuts in federal jobs. “While it is unclear what these trends mean for the labor market, we are observing a noticeable drop in hiring across essential sectors of the economy.”

As the stakes rise, major retailers are warning that they may pass some of the costs of Trump's tariffs onto consumers. Companies like Target and Best Buy have expressed concern about this possibility, especially after the White House recently announced temporary reliefs on some tariffs. Also, Walmart has cautioned that it may not escape the consequences of the new import taxes affecting the nation’s key trading partners.

Richardson identified retail as a “sector to watch” in the upcoming employment report since the trade, transportation, and utilities categories were leading sources of job gains in ADP's January data. She mentioned that the sluggishness in consumer spending after the holiday season could shape the BLS data and better inform future retail hiring trends.

Some analysts on Wall Street estimate that job losses attributed to the Department of Government Efficiency (DOGE) could reach up to 500,000. Nevertheless, Barclays analysts contend that even such significant job losses would have a limited effect on the overall economy, given that federal payrolls represent only 1.5% of total jobs. Even potential losses among government contractors are unlikely to drastically shift the job market dynamics, according to their research.

Economy, Jobs, Unemployment