TLDR
- Private sector added only 77,000 jobs in February, well below January’s 186,000 and expectations of 140,000+
- ADP chief economist Nela Richardson cited “policy uncertainty and consumer spending slowdown” causing hiring hesitancy
- Trade, transportation, and utilities sectors lost 33,000 jobs while leisure and hospitality added 41,000
- This slowdown occurs amid concerns about economic health and potential impacts of Trump’s tariff plans
- The February jobs report from the Bureau of Labor Statistics is expected Friday, with economists forecasting 160,000 new jobs
The US private sector added just 77,000 jobs in February, a sharp decline from January’s 186,000 jobs and far below economists’ expectations of around 140,000 new positions. The data, released by payroll processing firm ADP on Wednesday, represents the largest month-over-month drop in private payroll additions since March 2023.
Companies across several sectors showed reluctance to hire amid growing economic uncertainty. The dramatic slowdown comes as businesses assess potential impacts of new policies and react to recent consumer spending declines.
“Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” said ADP’s chief economist Nela Richardson in a press release. She added that the data, combined with other recent indicators, points to “hiring hesitancy” among employers.
The job growth was uneven across industries. Trade, transportation, and utility sectors suffered the biggest losses, shedding 33,000 jobs in February. Education and health services also saw a drop of 28,000 positions.
Some sectors bucked the downward trend. Leisure and hospitality showed the strongest performance, adding 41,000 jobs. Professional and business services created 27,000 new positions, while both financial activities and construction added about 25,000 jobs each.
Manufacturing reported an increase of 18,000 jobs. This positive number contrasts with the Institute for Supply Management’s manufacturing survey for the month, which had indicated companies were pulling back on hiring in this sector.
Job growth was surprisingly balanced between service-providing and goods-producing companies. Services added 36,000 positions while goods producers created 42,000 jobs. This balance is unusual in the US economy, which typically sees services dominating job creation.
Recent weeks have shown cooling economic data
The job market slowdown fits into a broader pattern of cooling economic data. Recent weeks have shown declines in consumer spending, retail sales, manufacturing activity, and construction spending. Housing activity remains slow as well.
Large companies drove most of the hiring in February. Businesses with 500 or more employees added 37,000 jobs. Smaller firms with fewer than 50 employees actually cut 12,000 positions during the month.
Annual pay growth held steady at 4.7% in February, unchanged from January. This wage growth figure provides some stability amid other fluctuating economic indicators.
The ADP report comes ahead of the official Bureau of Labor Statistics (BLS) jobs report due Friday. Economists expect the BLS report to show the US economy added about 160,000 jobs in February with unemployment holding at 4%.
The two reports often show different results due to their varying methodologies. In January, for example, BLS reported just 111,000 new private sector jobs, while ADP counted 186,000 for the same period.
Richardson told Yahoo Finance that the labor market is showing “the same downshift that is reflective of the overall economy.” She noted decreased consumer spending in January, with industries tied to consumer activities feeling an “inflection point downward.”
Despite the slowdown, Richardson maintains the labor market remains healthy overall. “Even with the latest jobs report, I still am in the healthy labor market camp,” she said. “That doesn’t mean that every part of the labor market is healthy, and some are flashing yellow lights a little stronger and longer than others.”
Former Council of Economic Advisors chairman Jason Furman offered a similar assessment in a Wednesday morning interview. “I don’t think the economy is turning on a dime in a negative direction,” Furman said. “But everything on the uncertainty, sentiment, all of that is pushing toward slowing.”
The news had a modest impact on markets
The job market news had a modest impact on financial markets. Stock market futures trimmed some gains following the release, while Treasury yields showed mixed reactions. Investors continue to watch economic data closely for signs of how the economy may perform throughout 2025.
President Trump’s proposed tariff plans have added another layer of uncertainty to the economic outlook. Some economists worry that new tariffs could spark inflation while simultaneously slowing growth. In a worst-case scenario, this combination could lead to stagflation—a condition where the economy experiences flat or negative growth alongside rising prices.
The February job numbers arrive at a time when many businesses are carefully assessing their hiring plans in light of changing economic conditions. The next few months of employment data will be closely watched for signs of whether this slowdown represents a temporary pause or the beginning of a more persistent trend.
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