The American labor market contracted unexpectedly in February, with employers cutting 92,000 jobs and the unemployment rate ticking up to 4.4 percent, the Bureau of Labor Statistics reported Friday, delivering an unwelcome surprise to an administration that has staked its political fortunes on economic strength.
The decline — the steepest since October and the largest excluding 2025 since late 2020 — caught economists off guard. Forecasters had anticipated a gain of roughly 55,000 jobs. Instead, the economy shed workers across multiple sectors, with the health care industry, long a reliable engine of job growth, leading the way down.
Compounding the disappointing headline figure, the government revised its estimates for December and January lower by a combined 69,000 jobs. December’s previously reported gain of 48,000 jobs was restated as a loss of 17,000. January’s increase, initially celebrated as a robust 130,000, was trimmed to 126,000.
The February figures mark the third payroll decline in the past five months, raising questions about whether the labor market’s resilience is finally cracking under cumulative pressures.
Health Care Strike Distorts Picture
Health care employment dropped by 28,000 jobs in February, a sharp reversal from the 77,000 jobs added in January. The decline was driven primarily by strike activity: physicians’ offices lost 37,000 positions as more than 30,000 health care workers from Kaiser Permanente facilities participated in walkouts during the BLS survey week.
Hospitals, by contrast, added 12,000 jobs, partially offsetting the losses. Over the previous 12 months, health care had averaged 36,000 new jobs per month, making February’s decline stand out as likely temporary.
Manufacturing Slump Continues
Manufacturing employment fell by 12,000 jobs in February, extending a prolonged period of weakness. The sector has now lost jobs in 14 of the past 15 months, according to multiple reports, underscoring the challenges facing American industry despite administration pledges to revive factory employment.
Economists pointed to several factors weighing on manufacturing: weakness in single-family housing construction affecting sawmills and furniture makers, higher input costs from tariffs, and persistent uncertainty about trade policy that has left factory managers reluctant to hire.
“It’s a lot of uncertainty,” Susan Spence, chair of the Institute for Supply Management, told Marketplace. “Our customers are ordering in very small increments because they just don’t want to be ordering the higher-price material.”
Federal Workforce Shrinks
Federal government employment continued its downward trajectory, shedding 10,000 jobs in February. Since reaching a peak in October 2024, federal payrolls have contracted by 330,000 positions — an 11 percent reduction attributed to administration efforts to pare government staffing.
Information services lost 11,000 jobs, continuing a trend that has seen the industry shed roughly 5,000 positions per month over the past year, with analysts linking the losses to technological restructuring and artificial intelligence-driven workforce adjustments.
Transportation and warehousing employment fell by 11,000, with courier and messenger services accounting for most of the decline. Construction companies cut 11,000 jobs, a figure likely reflecting frigid winter weather that kept workers home. Leisure and hospitality shed 27,000 positions, as consumers apparently stayed home during storms.
Unemployment Details
The unemployment rate rose to 4.4 percent, with 7.6 million Americans counted as jobless. That compares with 4 percent when Trump returned to office in January 2025.
Among demographic groups, unemployment rates showed little monthly movement but revealed persistent disparities: 3.7 percent for White workers, 7.7 percent for Black workers, 4.8 percent for Asian workers, and 5.2 percent for Hispanic workers.
The number of long-term unemployed — those jobless for 27 weeks or more — stood at 1.9 million, accounting for 25.3 percent of all unemployed individuals. That figure has risen from 1.5 million a year earlier, suggesting that some workers are finding it increasingly difficult to reenter the workforce.
Mixed Signals on Wages, Underemployment
Despite the job losses, wages continued to climb. Average hourly earnings rose 15 cents to $37.32, a 0.4 percent monthly increase, and were up 3.8 percent over the past 12 months. For production and nonsupervisory workers, hourly earnings increased 9 cents to $32.03.
The combination of job cuts and rising wages presents a complicated picture for policymakers. Some economists suggested the wage figures might be skewed by the strike activity: with lower-wage workers staying home during the survey week and not being counted, the reported earnings tilted toward higher-paid employees who could work remotely.
More encouraging was a sharp drop in the number of people employed part time for economic reasons — those who want full-time work but can only find part-time positions. That figure fell by 477,000 to 4.4 million, indicating improved conditions for some workers even as overall employment contracted.
The labor force participation rate held steady at 62.0 percent, while the employment-population ratio remained at 59.3 percent.
Weather and Distortions
Economists cautioned that February’s weak numbers likely overstate the underlying softness in the job market, just as January’s stronger figures probably overstated the strength. Severe winter storms across much of the country during the survey week kept workers home and temporarily closed businesses, particularly in construction and leisure and hospitality.
The strike activity in health care, involving more than 30,000 workers, temporarily removed those individuals from payroll counts even though they remained employed.
“Hiring remains subdued, but the weather almost certainly played a significant role here,” economists at ING wrote in an analysis. “The February data probably overstates the weakness due to the weather and strikes.”
Still, the underlying trend points to a labor market that is “just treading water,” with payrolls trending at around 50,000 jobs per month — barely enough to keep pace with population growth. A January report from the same firm noted that three sectors — government, leisure and hospitality, and private education and health services — have been responsible for all job creation over the past three years, while the rest of the economy combined has lost 460,000 jobs since December 2022.
Policy Implications
The weak jobs report arrives at a delicate moment for the administration, which has made economic performance central to its political message. With midterm elections on the horizon, the combination of rising unemployment and the inflationary shock from surging energy prices — Brent crude topped $85 a barrel this week amid escalating conflict in the Middle East — poses a serious challenge.
White House spokesperson Kush Desai sought to strike an optimistic note, pointing to private-sector job growth through the first two months of the year and arguing that the administration is “doing its part to unleash robust, private sector-led economic growth with tax cuts and deregulation.”
For the Federal Reserve, the mixed signals complicate the path forward. Weaker hiring might normally support arguments for interest rate cuts, but persistent wage growth and the inflationary potential of higher energy prices argue for caution. Traders following the report pulled forward expectations for the next rate cut to July, pricing in two reductions by year’s end, according to the CME Group’s FedWatch gauge.
ING economists pushed their rate cut forecasts from June and September to September and December, writing that “higher energy costs are inflationary and make near-term rate cuts look less probable” even as they ultimately prove demand-destructive.
Looking Ahead
The Bureau of Labor Statistics will release the March Employment Situation Report on April 3, 2026. Economists will be watching closely to determine whether February’s job losses represent temporary disruptions from weather and strike activity or the beginning of a broader economic slowdown.
For the 7.6 million Americans counted as unemployed, and the 1.9 million who have been looking for work for more than six months, the distinction may feel academic. In Beirut’s southern suburbs, where displaced families slept on streets and in parking lots this week, and in Tehran, where residents awoke to explosions and shockwaves from fresh airstrikes, the connections between geopolitics and economic pain are immediate and visceral.
The labor market, like the broader economy, now finds itself caught between forces beyond its control: war in the Middle East, uncertainty in trade policy, and the slow-burning consequences of technological change. Whether February’s decline proves a temporary stumble or the leading edge of something worse is a question that will occupy policymakers, economists, and American workers in the months ahead.