Forecasts for February Jobs Report Show More Healthy Growth, for Now

Key Takeaways

• Jobs growth is forecast to remain healthy in February.
• Federal job cuts and changes to immigration policy are expected to weigh on job creation in the months ahead.
• The Fed is seen holding rates steady at its March meeting, given sticky inflation and uncertainty surrounding US trade policy.

Forecasts for the February nonfarm payrolls report find that the US labor market continued to add jobs at a healthy clip last month. Data in line with expectations will likely give the Federal Reserve more confidence to hold interest rates steady, as inflation remains sticky and uncertainty persists around US trade policy.

Amid anxiety over slowing economic growth, tighter immigration policy, and federal job cuts, investors will watch the report closely for any signs of weakness.

Overall, economists expect that US employers added 160,000 jobs in February, according to FactSet’s consensus estimates. That’s modestly higher than the 143,000 jobs added the previous month. The unemployment rate is expected to remain steady at 4.0%, while hourly earnings growth is expected to fall to 0.3% in February from 0.5% in January.

Gus Faucher, chief economist for PNC Financial Services Group, expects job growth of 160,000 for February, in line with the consensus estimate. That’s “about what the Fed wants to see,” he says. “That’s consistent with growth in the labor force.”

The labor market is adding jobs at a slower pace than last year, observes Comerica Bank chief economist Bill Adams. However, the labor force is also adding workers at a slower pace because of tighter immigration policy under the new Trump administration. Adams says his forecast of 150,000 jobs added for February would be “enough to keep up” with that growth.

February Jobs Report Forecast Highlights

• Jobs report release date and time: Friday, March 7, at 8:30 a.m. EDT
• Nonfarm payroll employment is forecast to rise 160,000 vs. a 143,000 increase in January, according to FactSet.
• The unemployment rate is forecast to remain steady at 4%.
• Hourly earnings are predicted to rise 0.3% on a monthly basis after rising 0.5% in January.

With two major disruptions to the labor market (January’s wildfires and severe winter weather) now in the rearview mirror, Adams expects a recovery in certain sectors. “February will likely see a rebound of jobs in industries with a lot of hourly workers, like retail and hospitality,” he says.

Impact of DOGE Cuts Muted, for Now

At the same time, Adams expects spending and job cuts in the federal government to drag on job growth in February, though the exact impact is difficult to quantify as circumstances continue to evolve. So far, he expects cuts at the federal level to show up primarily in the private sector as spending changes impact government services providers. Federal layoffs are ongoing, and many federal workers who have taken buyouts remain on government payrolls.

Economists from Goldman Sachs are anticipating government layoffs and the hiring freeze to account for a drag of 10,000 jobs. Meanwhile, economists from Bank of America don’t expect a “sizable drag” in February, and they say the impact of federal layoffs is likely to be felt more acutely in March.

Over the next six months, Adams expects to see a drag on job creation of 250,000-500,000 as a result of changes implemented by the Department of Government Efficiency.

Wage Growth Likely to Moderate

With inflation remaining stubbornly above the Fed’s target, economists are closely watching wage growth. Wages that keep pace with inflation or even outpace it can help bolster economic growth but can also exacerbate inflation. Wage growth accelerated in January but is expected to moderate in February’s report.

Faucher says wage growth in line with his 0.2% forecast “would give the Fed a little bit of reassurance that the labor market isn’t in danger of overheating again.”

Adams adds: “I don’t think the job market is creating inflationary pressures right now, but if changes to immigration policies cause it to tighten this year or in 2026, it could reemerge as a source of inflation risk.” But for now, he says, “it’s hard to see the labor market creating inflation pressures with the unemployment rate above 4%.”

Fed Seen Holding Steady in March

Analysts think solid labor market fundamentals will give the central bank wiggle room to understand the impact of tariffs and new immigration restrictions on the economy.

“They can see what happens to inflation in the near term,” says Faucher. In the Fed’s view, “there’s no hurry to cut, because the labor market appears to be holding up.”

Market watchers generally expect the central bank to hold rates steady at their current range of 4.25%-4.50% in March. “Something big would have to change for the Fed to cut,” Adams says. Bond futures markets are currently pricing in 94% odds that the Fed keeps rates unchanged in March, according to the CME FedWatch Tool.