February jobs report: Calm before the storm

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor’s Lead Economist Daniel Zhao.

The February jobs report shows a labor market continuing to steam along, but it may just be the calm before the storm, as federal workforce layoffs, tariffs and general business uncertainty threaten to disrupt the economy in coming months. 

Key stats:

Which sectors will drive job gains in 2025?

Even though payroll employment was close to expectations, there were shifts in which sectors drove the jobs growth. For example, federal payrolls shrank by 10,000 (3,500 in Postal Service, 6,700 elsewhere in the federal government). Note: this precedes the DOGE federal workforce cuts and is more likely due to attrition combined with hiring freezes. Making up for the federal job losses, private sector payroll growth rose from 81,000 to 140,000.

While it’s highly uncertain how far the DOGE layoffs will go, federal payrolls will very likely go from adding 46,000 in 2024 to being a drag on payrolls in 2025. But the reversal in federal jobs growth also points to other reasons for choppy waters in the job market.

Leisure & hospitality, health care, education and government were big drivers of jobs growth in 2024, averaging 146,500 jobs added monthly in H2. Those sectors together have slowed sharply in 2025, averaging just 81,800 jobs added so far in 2025. Other cyclical sectors have been sluggish in the last year and may have a hard time picking up the slack to sustain the 2024 pace of jobs growth.

How long can labor hoarding last?

Since the labor shortages era, companies scarred by their inability to find new workers have seemed hesitant to quickly turn to mass layoffs like they have in past slowdowns. Despite layoffs in the headlines, the layoff rate has been well below pre-pandemic levels for much of the last four years. Instead, companies have seemed to prefer holding onto workers, but perhaps cutting their hours to manage slack economic conditions.

More evidence of this story showed up in the February jobs report. Average weekly hours were flat at 34.1 hours in February, tied for the lowest level since early-Covid.

This low level of worker utilization also shows up in the household survey. The share of employed workers part-time for economic reasons (for example, due to weak economic conditions rather than due to noneconomic reasons like family obligations) rose to 3% in February, tying the recent August 2024 high which itself was the highest level since 2021.

Labor hoarding can be good for workers by offering job security while sacrificing some short-term hours and pay as a result. But workers cannot forgo paychecks forever, and the rising share of workers part-time for economic reasons suggests that more part-time workers are unable to find full-time work at their employers and, crucially, on the open market.

Ultimately, the question about the labor hoarding story has always been what will happen when the rubber hits the road. If the economy slows more dramatically, companies will not have the financial cushion to hold onto workers who are not working and will have to turn to layoffs.

Unemployment rises but still only flashing yellow

The unemployment rate rose to 4.1% in February. After rising more steadily in early 2024, the unemployment rate has plateaued in recent months. The rate also remains below the Sahm rule recession indicator threshold and staying at 4.1% means the threshold will mechanically rise as months of lower unemployment fall out of the consideration window for the rule.

The rising unemployment rate was married with a lower labor force participation rate, dropping to 62.4%, the lowest level since January 2023.

However, the declining labor force participation rate in February was in large part driven by workers over 55 years old, who are near or at retirement age. Focusing on just prime-age workers (25–54 years old), the prime-age labor force participation rate was flat at 83.5% in February. While this is below the mid-2024 highs, it still remains a relatively healthy level overall, comparable to pre-pandemic levels last seen in 2002.

More Insights

Payroll employment grew 151,000, slightly below expectations of around 160,000 jobs added in February.

State and local governments were a large driver of jobs growth in 2024 and they are still playing catch-up with private sector employment growth since the pandemic. As the federal workforce is cut in coming months, federal payrolls will dip below private sector growth since the pandemic.

Average hourly earnings growth was unchanged in February at 4% year-over-year. On a 3-month annualized basis, growth slowed to 3.6%. Wage growth has hovered around 4% for the last year.

White and Hispanic unemployment rose slightly in February, while it fell slightly for Black and Asian workers.

The prime-age employment-population ratio dropped to 80.5% in February, still a relatively high level by historical standards but also still a touch below the mid-2024 highs.

To speak with Daniel Zhao about this report, please contact pr@glassdoor.com.