The newly established Department of Government Efficiency has eliminated jobs, reduced federal spending, and terminated contracts, which could have far-reaching effects on the US labor market. The Labor Department is expected to unveil the February jobs report at 8:30 a.m. ET on Friday. Economists anticipate another month of strong job growth, with estimates projecting a net gain of 160,000 jobs and the unemployment rate holding steady at 4%, near historic lows. However, recent data reveals a surge in layoff plans last month, potentially driven by the Trump administration’s significant federal budget cuts and growing economic uncertainty.
US employers announced plans to cut 172,017 jobs in February, a 103% increase compared to a year ago and the highest February total since 2009. The majority of these job cuts occurred in the government sector, where the Department of Government Efficiency implemented workforce reductions, budget cuts, and contract cancellations. Additionally, downstream impacts led to further job cuts in private nonprofits.
The report highlighted concerns raised by Gregory Daco, chief economist at EY Parthenon, emphasizing that the government-related layoffs accounted for a significant portion of the overall job cuts. The reasons cited for the planned job reductions included actions by the Department of Government Efficiency, bankruptcy, market/economic conditions, and restructuring. Despite the challenging outlook, the report also noted an increase in companies’ hiring plans in February, reaching the highest number for that month since 2022.
Economists are closely monitoring the weekly unemployment claims data as well to assess the health of the labor market. The recent jobless claims figures indicate ongoing layoff activity, adding to the cautious outlook for the future.
The number of initial claims dropped by 21,000 to 221,000 last week, according to a report from the Labor Department. On the other hand, there was an increase in the number of federal workers filing for unemployment benefits under the Unemployment Compensation for Federal Employees program. In the week ending February 22, 1,634 federal workers filed initial claims, an increase of 1,020 from the previous week.
Recent data indicates a slowdown in hiring activity in the US private sector. ADP’s latest employment report showed a decrease in private-sector employment by an estimated 77,000 jobs in February, a significant drop from the previous month. Industries closely linked to consumer activity experienced the largest declines in employment, according to ADP.
Consumer spending saw a decline in January, the first drop in nearly two years. However, economists caution against reading too much into one month’s data, attributing the decrease to typical post-holiday spending patterns and external factors like severe weather events.
While ADP’s employment report may not always align with the monthly jobs report from the Bureau of Labor Statistics, it is considered a valuable indicator of labor market trends. The impact of recent employment cuts driven by various factors, such as the recent job losses related to DOGE, may not be fully reflected in the February jobs report due to timing and reporting criteria.
Economists suggest that the effects of these employment cuts may be more noticeable in the coming months’ jobs reports. Despite potential weaknesses in the federal sector’s employment data for February, it is not expected to have a significant impact on the overall employment figures. The full effects of recent economic policies and cutbacks may not be fully captured until the March and April reports.
Friday’s upcoming jobs report will have a missing piece due to a scheduling anomaly. The Job Openings and Labor Turnover Survey for January won’t be released until next week because of this calendar-related quirk. Typically, the JOLTS report is made public three days before the jobs report is issued.
Since the onset of the Covid-19 pandemic, economic forecasting has become increasingly challenging for economists. This Friday’s jobs report is no exception. While the federal employment impact under the current administration may be minimal, some economists warn that these actions could have repercussions in other areas. Economist Dean Baker, co-founder of the Center for Economic Research, expressed concerns that federal spending cuts could lead to reduced hiring in the private sector.
In the aftermath of the pandemic, job growth has slowed but not collapsed. The stable gains have supported consumer spending and positioned the economy for a controlled reduction in inflation without triggering a recession. Despite some emerging challenges in the labor market over the past year, there is optimism about the resilience of the economy given low unemployment rates and steady job growth.
As the US labor market entered February, it maintained a momentum reminiscent of pre-pandemic levels, continuing its historic expansion. However, certain cracks began to surface, such as a slowdown in the necessary turnover for a healthy labor market and decreased hiring activity. Economists attribute these trends to factors like election uncertainty, excessive hiring in certain sectors, and the impact of rising prices and interest rates.
Although initial post-election optimism boosted consumer and business sentiment, recent economic uncertainty has emerged from sweeping policy actions, including tariffs, federal job cuts, and deportations. This uncertainty has led to businesses delaying expansion plans. Economist Martha Gimbel highlights the hesitancy among businesses to invest in their workforce amid such economic uncertainties.
Overall, the economic landscape remains uncertain, with the potential for significant impacts from recent policy decisions. Businesses are cautious about future investments in light of these uncertainties.
Gimbel pointed out the uncertainty surrounding the economy and individual needs, noting a trend towards a more cautious approach. CNN’s Matt Egan also provided reporting for this information. To access additional CNN news and newsletters, sign up for an account on CNN.com.
