The health care sector added 52,000 jobs in February, accounting for more than one-third of employment growth in the month. This figure was in line with most expectations and indicates that federal layoffs and contract cancellations have not yet had a substantial impact on overall employment growth.

However, it is worth noting that a drop in hours in January, which was thought to be related to weather and the Los Angeles fires, was not reversed in the February data. The index of aggregate hours in February is 0.1 percent below its average for the fourth quarter of last year.

The household survey also showed some worrisome signs. The unemployment rate rose to 4.1 percent, which still left it an historically low level. However, there was a sharp rise in the number of people who report they are working part-time but want full-time jobs. As a result, the broader U-6 measure of unemployment jumped 0.5 pp to 8.0 percent, the highest since October of 2021.

Employment Falls by 588,000 in Household Survey

The rise in the unemployment rate was accompanied by both a sharp rise of 460,000 in the number of people who report working part-time and a large fall in the number of people reported as employed. The latter may mean little since monthly data in the household survey are highly erratic. Employment reportedly dropped by 762,000 in December of 2023, when by all other measures the economy and the labor market were doing fine. However, taken together with the large rise in involuntary part-time and weakness in hours in the establishment survey, this could be a real indication of a weakening labor market.

The drop in reported employment was accompanied by a decline of 0.2 pp in the prime-age (25 to 54) employment to population ratio. The drop was 0.3 pp for men; the rate for prime age women was unchanged. Also, there was a big drop in reported employment for younger workers. Employment for people in the 20-24 age group, the group we would expect to be hit hardest by a drop in hiring, fell by 274,000.

Year Over Year Rise in Employment of Immigrants Is Just 685,000

It is difficult to get a good gauge of the potential impact of the Trump administration’s immigration policy – both because the data are not seasonally adjusted, and we just added a massive number of immigrants into the household survey with the new population controls in January.

The new population controls added a total of 2,121,000 people identified as either Hispanic or Asian. Applying the 63.3 percent employment-to-population ratio for non-native people to this number implies that it added 1,343,000 to the employment number for non-native workers in January. The February jobs report shows employment of non-native workers as 685,000 above the year ago level, a figure far less than what was added in by the new population controls.

However, the new population controls presumably do reflect an actual increase in the number of immigrants in the country, so it would be wrong to dismiss the year-over-year gain reported for February. But we can look at the late 2024 year-over-year gains, which did not include the population controls, as reference points. Those year-over-year numbers were 401,000 and 342,000 for November and December, respectively. These year-over-year figures would have been close to 1.7 million for both months if we had added the new population controls in November instead of January. This does suggest a sharp slowing in employment growth for immigrants.

It is worth remembering that immigration slowed sharply last June due to a change in Biden administration policy. This would have led to slower employment growth of non-native workers in any case, although the Trump administration’s policies will surely amplify the effect.

Wage Growth Slows Slightly in February

There is some evidence of slowing wage growth in the February report, as the annual rate of increase over the last three months was 3.6 percent, down from 4.0 percent over the last year. This would not be surprising if workers are getting more reluctant to leave jobs in search of better pay, but the monthly wage data are highly erratic so it’s not clear this drop is real.

Slower wage growth should make the Fed less concerned about inflation, although it is hard to get a good assessment of productivity growth just now. The weak hours numbers are good from the standpoint of productivity, but if GDP also comes in very weak, as early data indicate, then the growth number for the quarter may not be very good.

Couriers Take Second Place to Health Care in Job Creation

While job growth in health care was almost exactly in line with its pattern over the last year, the growth or job loss in other sectors was highly unusual. The category of messengers and couriers (delivery people) added 23.5k jobs, accounting for 15.6 percent of the month’s employment growth.

Construction and manufacturing both had good months, adding 19,000 and 10,000 jobs, respectively. Both numbers were bounce backs from weakness in the prior months’ data, which was likely affected by both the LA fires and the weather. This is clearest in manufacturing, where the auto sector added 8,900 jobs after reportedly losing 10,400 jobs in January.

The state and local government sectors added 21,000 jobs, although this was partly offset by a decline in employment of 10,000 at the federal level. Restaurants, which had been a major source of job growth, lost 27,500 jobs after losing 29,500 jobs in January.

The good-paying professional and technical service sector lost 9,300 jobs after losing 8,700 in January. It had added an average of 5,000 a month in the year to December.

Healthy Job Growth, but Worrying Signs

The overall job growth number for February is encouraging, but there are many causes for concern in this report. The rise in unemployment, and especially the large jump in involuntary part-time employment, is definitely cause for concern. This is also consistent with the weak hours data in the establishment survey.

Also, the erratic pattern of job gains in the establishment survey raises questions about the continued strength of the labor market. Will hospitals and other providers continue to be anxious to hire when faced with the prospect of major cuts to Medicaid and other streams of federal funding? It also seems unlikely that we will see 23,000 new couriers hired each month. And slower wage growth is not good news for workers.

We always need to caution about making too much of one month’s data, and the overall jobs number in this report is definitely a big positive, but there are also good reasons to be worried.