Kiplinger Jobs Outlook: February Not as Bad as It Looks, but Weakness Is Evident
February’s bad report was amplified by weather and a strike, but the low-hire, low-fire environment persists.
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Just as January’s 126,000 jobs gain was too strong to be trusted, so is February’s 92,000 loss too weak to be believed. Special factors included 31,000 health care workers out on a strike, which has since ended. Also, the winter storms in late January and early February likely temporarily lowered employment in construction, leisure and hospitality, and transportation.
However, there are still signs of weakness in other sectors that were not likely to have been affected by the weather, such as manufacturing, information and government (though federal job cuts appear to be slowing). Expect smallish monthly job gains this year, on average. Only 2,000 net new jobs have been added over the past six months.
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The low-hire, low-fire jobs environment was evident in a still-low 4.4% unemployment rate, though the tick up from 4.3% occurred because some workers lost their jobs — not because of the more benign factor of more unemployed people starting to actively look for work and getting counted as unemployed in the jobs report. One piece of good news: The number of people forced to work part-time because of slack business conditions dropped in February.
After new population numbers from the Census Bureau became available, government statisticians found that the labor force was smaller than previously assumed, to the tune of 1.4 million workers and potential workers. The labor force participation rate, at 62.0%, was the lowest since 2021.
Average hourly earnings ticked up by 3.8% over the past 12 months, but gains eased to 3.7% for production workers (blue-collar and non-administrative employees). The monthly earnings data have been rising at a slightly faster rate than the more accurate quarterly Employment Cost Index, which showed 3.3% wage growth for all of 2025. The difference between the two labor cost measures could be that earnings are being skewed upwards because of a lack of hiring entry-level workers.
The weak February jobs report will not cause the Federal Reserve to cut interest rates, unless it is followed by similarly feeble reports. The Fed will be concerned about rising energy inflation, though officials will mostly discount it as temporary. We expect rates to remain unchanged during Chair Jay Powell’s remaining term, which expires in May. But after that, the odds are good for two quarter-point cuts later in 2026 under incoming Chair Kevin Warsh.
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