February Jobs Report Shows Hiring at a “Standstill”

Key Takeaways

• The February employment report showed surprise job losses and the unemployment rate rose, signaling renewed weakness in early-2026 hiring momentum.
• The healthcare sector saw the steepest job losses—a stark contrast from its strong January gains, which had powered the broader hiring picture.
• Although February’s jobs data missed the mark, economists expect the Fed to leave interest rates unchanged.

The jobs market unexpectedly reversed in February, with the US economy shedding 92,000 jobs, painting a picture of a stagnant hiring environment. The report came after January’s jobs data had suggested demand for labor was picking back up after a sluggish second half of 2025.

Economists had expected some cooling in hiring after January’s healthy reading. But with widespread declines, economists say the February jobs report paints a dour picture. “After lackluster job gains in 2025, the labor market is coming to a standstill,” says LPL Financial chief economist Jeffrey Roach.

The Bureau of Labor Statistics reported that nonfarm payroll employment fell by 92,000 in February, far from the 60,000 increase expected by FactSet. The unemployment rate inched up to 4.4% from 4.3%, against expectations that it would hold steady.

February Jobs Report Key Stats

• Total nonfarm payrolls fell by 92,000 after rising by 126,000 in January.
• The unemployment rate rose to 4.4% in February.
• In February, average hourly wages rose by 15 cents, or 0.4% , to $37.32

Despite the surprise drop in hiring, the Federal Reserve is still largely expected to keep interest rates steady when officials meet later in March. “Job growth has weakened considerably again, but it won’t be enough to permit the Fed to cut rates at its next meeting,” says Morningstar senior US economist Preston Caldwell.

Much of the hiring slowdown stemmed from the healthcare sector, which had powered January’s gains with 77,000 new jobs. The BLS says the sector lost 28,000 jobs in February due to strike activity. The federal government and information sectors also saw job losses, while social assistance hiring rose.

Signs of Labor Market Weakness Persist, But Not Time for Panic

The February jobs report extends a months-long trend of labor market softness, says Comerica Bank chief economist Bill Adams. He notes that the BLS revised December and January payrolls down by a combined 69,000 jobs. “Downward revisions are more common in a weakening labor market,” he says.

Jason Pride, chief of investment strategy at Glenmede, says these repeated downward revisions warrant close attention. Still, he also cautions against putting too much emphasis on month-to-month changes in unemployment: “The rate remains well within the neighborhood of the natural rate of unemployment, consistent with a well-functioning economy dealing with normal frictional factors, though its recent upward drift warrants monitoring.”

To assess whether labor market weakness is cause for serious concern, Adams says he looks to the Sahm indicator, a which signals the beginning of a recession based on recent unemployment rate readings. While the unemployment rate edged up, he says the data does not indicate recessionary conditions. “The labor market is weakening, but this is more of a yellow light than a red light,” he explains.

What Does This Mean for the Federal Reserve?

While the jobs data came in softer than expected, analysts anticipate the Fed will keep rates unchanged at its next meeting. CME’s FedWatch tool shows that more than 95.3% of market participants expect the central bank to hold the federal-funds rate target at its current range of 3.50%-3.75%, while the remaining sliver predicts a quarter-point cut.

Jeff Schulze, head of economic and market strategy at ClearBridge, says February’s jobs data puts the Fed “between a rock and a hard place,” given worsening inflationary pressures linked to the Iran war.

January’s Consumer Price Index report showed easing price growth, but Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management, says the latest spike in oil prices has fueled concerns about inflation and complicated the Fed’s outlook. “Add higher oil prices given conflict in the Middle East and renewed tariff uncertainty to the convoluted jobs market story, and you have a tricky, stagflationary mix of risks in the backdrop,” she says.

While analysts expect the Fed to hold rates steady, a cut could be on the table sooner rather than later, given the weakening jobs picture, according to Comerica’s Adams. “A small margin of slack has opened in the labor market with job growth failing to keep up with the number of job seekers,” he says. “That pressures the Fed to attach a higher priority to its maximum employment mandate.”

Adams says a rate cut is now possible before Kevin Warsh takes over leadership of the central bank in the spring, though he thinks the Fed will need more evidence of persistent labor market weakness. “The weaker-than-expected February jobs report puts a rate cut back on the table before [Fed Chair Jerome] Powell’s term ends in May,” he says. “But it’s far from a slam dunk.”

Morningstar’s Caldwell says that overall, “the latest numbers should give the Fed renewed concern that the labor market is weakening. However, the evidence is not so clear to offset the inflationary forces on the horizon, with the shock to oil prices from the Iran war. The Fed will keep the federal-funds rate unchanged in March, and probably its next meeting as well.”