U.S. payrolls fall in February as strikes, storms and federal cuts cool hiring

U.S. employers cut jobs in February for the first time in years, a surprising setback that underscored a slowing labor market just as renewed inflation pressures complicate the outlook for the economy.

Total nonfarm payroll employment fell by 92,000 last month, the Labor Department said Friday in its Employment Situation report for February. The unemployment rate edged up to 4.4%, leaving 7.6 million people out of work.

Economists had expected employers to add roughly 50,000 to 60,000 jobs. Instead, the report delivered one of the few negative payroll readings outside a recession or the pandemic since the recovery from the 2008 financial crisis.

While officials described payrolls as having “edged down” and the jobless rate as little changed, revisions to earlier data painted a weaker picture. December employment was revised from a small gain to a loss, and January’s growth was trimmed, erasing a combined 69,000 jobs from prior estimates. Over the past three months, employers have added an average of just 6,000 jobs a month — effectively flat in an economy with more than 158 million payroll positions.

Economists say temporary disruptions made February look worse, but argue that the broader trend is one of a labor market that has cooled considerably from the rapid hiring of the post-pandemic expansion.

“Strikes and weather played a role, but they don’t tell the whole story,” said Bill Adams, chief economist at Comerica Bank. “Once you factor in the benchmark revisions, the labor market has been treading water for the better part of a year.”

Strikes, storms and broad-based losses

Several one-off factors dragged down February’s numbers.

Health care, a sector that had been a major source of job growth, shed 28,000 positions. Employment at offices of physicians plunged by 37,000, a drop the Labor Department said was “primarily due to strike activity.” Hospitals added 12,000 jobs, partly offsetting the losses.

Private estimates suggest roughly 30,000 nurses and other health professionals were on strike during the government’s survey week. Those workers are expected to return to payrolls when disputes are resolved, likely boosting March statistics.

Severe winter storms also weighed on hiring. Leisure and hospitality employment fell by 27,000, including a loss of 35,000 jobs in accommodation and food services. Construction payrolls slipped by 11,000, a decline analysts tied to weather disruptions in parts of the country.

Yet weakness extended well beyond those categories. Manufacturing employers cut 12,000 jobs. The information industry, which includes media and many technology-related businesses, lost 11,000 positions and has been trending lower for a year. Transportation and warehousing employment fell by roughly the same amount, including a 17,000 drop in courier and messenger jobs, though air transportation added workers.

Government employment declined by 6,000, led by a loss of 10,000 federal jobs. Federal payrolls have shrunk by about 330,000, or 11%, since peaking in October 2024, reflecting an aggressive downsizing of the civil service under President Donald Trump.

A report from First Trust Advisors called it the steepest federal workforce reduction in decades when temporary Census workers are excluded.

The labor-force participation rate — the share of people working or actively looking for work — held at 62.0%, the lowest since late 2021. The employment-population ratio was little changed at 59.3%.

Long-term unemployment continued to creep higher. Nearly 1.9 million people had been out of work for 27 weeks or more in February, up from about 1.5 million a year earlier. Those workers now account for a quarter of all unemployed.

Rewriting 2025

Behind the February surprise is a quieter statistical story: annual revisions that have recast much of last year’s job market.

Each year, the Labor Department updates its payroll estimates to align with more complete data from unemployment insurance records and incorporates new population estimates into its household survey. The latest revisions lowered employment levels and showed weaker job growth than initially reported.

December 2025 is now estimated to have lost 17,000 jobs, compared with an earlier reading of a 48,000 gain. Combined with the smaller January revision, the changes suggest that job creation had already slowed to a crawl heading into 2026.

Private-sector economists who have reconstructed the data say that, after adjusting for those updates, total employment has essentially been flat or slightly declining on average for the past year, a stark contrast to the strong gains earlier in the recovery.

Wages firm as oil prices rise

Despite the drop in payrolls, pay continued to rise at a solid pace. Average hourly earnings for all private-sector workers increased by 15 cents in February, or 0.4%, to $37.32. Over the past 12 months, wages are up 3.8%.

Earnings for production and nonsupervisory workers — a broad measure of blue-collar and lower-wage employees — rose 0.3% on the month.

The average workweek for all employees held steady at 34.3 hours. Manufacturing employees worked slightly fewer hours.

The combination of softer hiring, stable hours and still-firm wage growth comes as inflation remains above the Federal Reserve’s 2% target and a new oil price shock ripples through the economy.

The war with Iran has pushed benchmark crude prices back above $90 a barrel, raising gasoline and diesel costs for households and businesses. Consumer price inflation has eased from its peak but is still running in the mid-2% range by the Fed’s preferred measure and is expected to pick up again as higher energy prices filter through.

That mix has revived worries about “stagflation,” a term associated with the 1970s, when slow growth coincided with high inflation.

“We are not in 1970s-style stagflation,” said Sarah House, a senior economist at Wells Fargo. “But the latest jobs report underscores the challenge of weaker momentum in the labor market at the same time that an oil shock is threatening to reheat inflation.”

Fed caught between weak jobs and inflation risk

The February employment numbers arrive weeks before Federal Reserve policymakers meet on March 17–18 to decide the path of interest rates.

The central bank cut rates several times in late 2025 as inflation cooled from earlier highs, then left its benchmark federal funds rate unchanged in a range of 3.50% to 3.75% at its January meeting. Chair Jerome Powell said then that the Fed was “in no rush” to move and would be guided by incoming data.

In a speech two weeks before the jobs report, Fed Governor Christopher Waller called the prospect of a rate cut in March “a coin flip,” saying a clear slowdown in hiring after a strong January could tilt the decision.

Financial markets now see a near-certain chance the Fed will hold rates steady this month, even after the weak payrolls reading. Futures pricing compiled by exchanges shows investors assigning only a small probability to a cut at the upcoming meeting, with expectations for any easing pushed into later in the year.

The report “puts the Fed in a difficult position,” Wells Fargo economists wrote in a note, arguing that softer labor data on its own would normally justify earlier cuts, but that the renewed rise in energy prices and still-elevated inflation argue for patience.

The central bank’s deliberations are unfolding against an unusual political backdrop. The Justice Department opened an investigation in January into whether Powell misled Congress in past testimony, and Trump has repeatedly urged the Fed to lower rates more quickly. Current and former Fed officials have said the central bank is determined to act independently despite the pressure.

Political and social stakes

The weak jobs report is likely to intensify scrutiny of Trump’s economic policies as the election year advances.

The administration’s sweeping tariffs and trade restrictions, launched in April 2025, have weighed on manufacturing and trade-sensitive industries, according to many economists. At the same time, a 2025 tax-cut package has widened the federal budget deficit, contributing to higher government borrowing needs.

Trump and his advisers have argued that cutting the federal workforce and reshaping trade relationships will strengthen the economy in the long run. Critics say the policies have damped business confidence and hiring while leaving the country more exposed to shocks like the current oil spike.

Beyond the policy debate, the numbers are already being felt in households.

Job losses in restaurants and hotels hit hourly workers who often have little financial cushion and are now facing higher fuel and food costs. Federal job cuts ripple through communities around Washington and other regions that depend on government employment and contracting. Health-care workers who walked picket lines in February gave up paychecks to press for better staffing and wages after years of strain from the pandemic.

For now, most forecasters stop short of declaring that the United States has slipped into recession. Initial claims for unemployment benefits remain relatively low, and prime-age workers — those 25 to 54 — are still participating in the labor force at high rates.

But the margin for error is narrowing.

“This is not a collapse in the labor market, but it is a clear downshift,” said Michael Gapen, chief U.S. economist at Bank of America. “If we see a couple more months like this, particularly without a convincing slowdown in inflation, the policy choices get much harder and the risks of a more serious downturn rise.”