February 2025 Jobs Report: 117,000 Positions Added as Labor Market Shows Signs of Cooling

The U.S. labor market continued its gradual normalization in February 2025, as employers added 117,000 jobs while the unemployment rate ticked up to 4.1%, according to the Bureau of Labor Statistics Employment Situation report released March 7\. The modest job growth, combined with declining job openings and rising layoffs, suggests a labor market that is cooling but not collapsing, finding equilibrium after years of pandemic-era volatility.

While February's hiring fell short of economists' expectations of 170,000 new positions, the report revealed a market that remains fundamentally stable. Healthcare continued its multi-year run as the economy's most reliable job creator, financial services expanded, and transportation showed resilience. However, federal government employment contracted as policy changes began reshaping the public sector workforce, and job openings declined to their lowest level since early 2021\.

The Headline Numbers: A Market in Transition

The Bureau of Labor Statistics' February Employment Situation report showed nonfarm payroll employment increased by 117,000 positions, bringing total U.S. employment to approximately 159.2 million workers. The unemployment rate increased by 0.1 percentage points to 4.1%, reversing January's decline and signaling a modest softening in labor demand.

Key metrics from the February report include:

• 117,000 jobs added across all sectors (below expectations of 170,000)
• 4.1% unemployment rate, up from 4.0% in January
• 62.4% labor force participation rate, down from 62.6% in January
• 4.0% wage growth year-over-year, with average hourly earnings increasing 0.3% month-over-month
• Average workweek held steady at 34.1 hours

The February figure represents the lowest monthly job gain since November 2024, when the economy added 138,000 positions. This deceleration is not unexpected. As the Federal Reserve maintains elevated interest rates to control inflation, labor demand naturally moderates. The question is whether this cooling represents a soft landing (gradual normalization) or the early stages of more significant weakness ahead.

Job Openings Decline: JOLTS Reveals Cooling Demand

The Job Openings and Labor Turnover Survey (JOLTS), released April 1 for February data, provided additional evidence of a cooling labor market. Job openings decreased to 7.6 million, down from 7.8 million in January and significantly below the 8.4 million openings reported a year earlier.

This represents the lowest level of job openings since April 2021, when the economy was still recovering from pandemic disruptions. The decline suggests employers are becoming more cautious about expansion, either due to economic uncertainty, concerns about consumer demand, or because existing staffing levels now match current business needs.

The JOLTS data revealed important shifts across key metrics:

• 7.6 million job openings, down 200,000 from January
• 5.4 million hires, consistent with the previous month
• 5.3 million total separations, unchanged from January
• 3.2 million quits, showing slight decrease in voluntary departures
• 1.8 million layoffs and discharges, up from 1.7 million in January
• Jobs-to-workers ratio: approximately 1.05 openings per unemployed person

The increasing layoffs, particularly in federal agencies (18,000 workers, the highest since October 2020) and retail, signal that some employers are moving beyond hiring freezes to active workforce reductions. Meanwhile, the declining quits rate suggests workers are becoming less confident about their ability to find better opportunities, typically an early indicator of softening labor market conditions.

Healthcare Dominates Job Creation Again

For the second consecutive month, healthcare led all sectors in job creation, adding 52,000 positions in February. This performance aligns with the sector's 12-month average, underscoring healthcare's role as the economy's most consistent employment engine.

The healthcare gains were distributed across multiple subsectors:

• 26,000 jobs in ambulatory healthcare services, including outpatient care centers, medical laboratories, and home healthcare
• 15,000 positions in hospitals, driven by persistent staffing shortages and increasing patient volumes
• 12,000 jobs in nursing and residential care facilities, as aging demographics drive demand for long-term care

The healthcare sector's resilience reflects structural demographic trends that transcend economic cycles. With 10,000 Americans turning 65 every day and a chronic shortage of nurses, therapists, and home health aides, UnitedHealth Group, Cigna Group, and other major healthcare providers continue expanding their workforces regardless of broader economic conditions.

This sector will likely maintain strong employment growth throughout 2025 and beyond, making healthcare one of the safest bets for job seekers navigating uncertain economic conditions.

Financial Services and Transportation Show Resilience

Financial Activities: 21,000 Jobs Added

The financial activities sector added 21,000 positions in February, reflecting continued strength in banking, insurance, and financial technology services. This growth comes despite ongoing concerns about commercial real estate stress and regional bank vulnerabilities.

The financial services gains likely reflect several factors: sustained consumer demand for financial products, continued corporate mergers and acquisitions activity requiring deal support, and growth in fintech companies like Plaid that are reshaping financial infrastructure. As interest rates remain elevated, banks also benefit from wider net interest margins, supporting profitability and employment.

Transportation and Warehousing: 18,000 Jobs Added

Transportation and warehousing added 17,800 positions (rounded to 18,000), indicating sustained demand in logistics and distribution. This growth is particularly notable given predictions that automation would accelerate job losses in this sector.

The February gains suggest that while automation is certainly reshaping logistics, demand growth for package delivery, freight movement, and warehouse operations currently outpaces workforce displacement. However, companies like Amazon and FedEx continue investing heavily in robotics and autonomous vehicles, suggesting this employment growth may not be sustainable long-term.

Social Assistance and the Federal Government Diverge

Social Assistance: 11,000 Jobs Added

The social assistance sector added 11,000 positions, reflecting continued demand for social workers, counselors, childcare providers, and support staff who serve vulnerable populations. This growth is driven by both demographic needs (aging population, children with special needs) and policy support for social services funding.

Federal Government: 10,000 Jobs Lost

In stark contrast, federal government employment declined by 10,000 positions in February, the most significant monthly decrease in over four years. This contraction reflects the new administration's focus on reducing federal workforce size through hiring freezes, reorganizations, and targeted reductions.

The JOLTS data provided additional context: federal agencies laid off 18,000 workers in February, the highest level since October 2020\. This suggests the workforce reduction is accelerating rather than tapering, with implications for government services, contractors, and the broader Washington, D.C. metropolitan economy.

While federal employment represents a relatively small portion of the overall U.S. labor market (approximately 2.3 million workers), these reductions have secondary effects on government contractors, consultants, and businesses that serve federal employees.

The Wage Growth Puzzle

Average hourly earnings increased by 0.3% in February, translating to a 4.0% year-over-year gain. This represents a modest deceleration from January's 4.1% annual growth, suggesting wage pressures are gradually easing.

However, the 4.0% wage growth rate still exceeds the Federal Reserve's 2% inflation target by a significant margin, creating a puzzle for policymakers. If inflation returns to the Fed's target range while wages grow at 4%, workers enjoy real wage gains and increased purchasing power. But if inflation remains sticky at 2.5-3%, the gap narrows and workers see minimal improvement in living standards.

For the labor market, the wage data suggests workers retain meaningful bargaining power despite softening hiring. Companies are reluctant to cut wages even as they slow hiring, preferring to maintain compensation levels for existing staff while reducing headcount through attrition or selective layoffs.

This wage stickiness is economically significant. In a true labor market collapse, wage growth would decelerate rapidly as unemployed workers accept lower pay to secure jobs. The persistence of 4% wage growth suggests the February slowdown represents normalization, not crisis.

Labor Force Participation Dips

The labor force participation rate declined to 62.4% from 62.6% in January, suggesting some workers are exiting the labor force rather than remaining unemployed. This 0.2 percentage point decrease translates to approximately 500,000 individuals who stopped looking for work.

This decline could reflect several dynamics:

• Discouraged workers: Some job seekers may be giving up after unsuccessful searches
• Early retirements: Older workers with adequate savings may be choosing to retire rather than navigate a softer job market
• Education/training: Some workers may be returning to school or training programs
• Caregiving responsibilities: Economic pressures may be forcing some workers to leave the workforce to provide unpaid family care

The Federal Reserve typically interprets declining labor force participation as reducing employment pressure, all else equal. If the labor force shrinks while job growth continues, unemployment can remain low even with modest hiring. However, persistent participation declines raise questions about the economy's long-term growth potential.

The Layoffs and Quits Dynamic

Perhaps the most revealing aspect of the February JOLTS data is the relationship between layoffs and quits. Layoffs increased to 1.8 million from 1.7 million in January, while quits declined slightly to 3.2 million.

This pattern matters because quits are a forward-looking indicator of worker confidence. When workers believe better opportunities are available, they voluntarily leave their current jobs. When confidence wanes, quits decline. The fact that quits remain above layoffs (3.2 million vs. 1.8 million) suggests workers still feel empowered to seek better positions, but the narrowing gap indicates that confidence is eroding.

The quits rate of 2.0% (quits as a percentage of total employment) is down from pandemic-era highs above 3%, but still above pre-pandemic norms around 2.3%. This suggests the labor market, while cooling, has not yet returned to pre-pandemic dynamics where workers had less mobility and negotiating power.

The increase in layoffs, particularly in federal agencies and retail, signals that some employers are moving beyond hiring freezes to active workforce reductions. Companies that over-hired during the pandemic recovery are continuing to right-size their operations, while others are responding to slowing consumer demand or implementing automation that reduces staffing needs.

What February Means for Job Seekers

For professionals navigating the February 2025 labor market, the data offers a nuanced picture:

• Healthcare remains the safest sector: With 52,000 jobs added and structural demographic tailwinds, healthcare offers the strongest employment prospects across skill levels
• Financial services show resilience: 21,000 jobs added suggests continued opportunities in banking, insurance, and fintech, particularly for professionals with technical or analytical skills
• Federal employment faces headwinds: The 10,000-job decline and 18,000 layoffs make federal jobs increasingly risky, with further reductions likely in coming months
• Wage growth persists: 4% annual gains suggest workers who switch jobs or negotiate raises can still see meaningful compensation increases
• Job search timelines are extending: Declining job openings mean competition for available positions is intensifying, requiring more patience and persistence

For those currently employed, the February data suggests maintaining current positions while selectively exploring opportunities makes sense. The job market is not collapsing, but it's not expanding robustly either. Workers with specialized skills in high-demand areas (healthcare, AI/ML, financial analysis) maintain leverage, while those in more commoditized roles face increasing competition.

Economic Context and Forward-Looking Risks

The February employment report must be understood within broader economic context. The Federal Reserve maintains interest rates at elevated levels (5.25-5.5% federal funds rate) to control inflation, which has proven more persistent than policymakers hoped. This restrictive monetary policy constrains business investment and consumer spending, naturally cooling labor demand.

Several risk factors could push the labor market from gradual cooling to more significant deterioration:

Policy Uncertainty: Proposed changes to trade policy, immigration restrictions, and federal spending could disrupt business planning and accelerate workforce reductions. The 18,000 federal layoffs in February may represent just the beginning of broader government workforce reductions.

Consumer Spending: With credit card debt at record highs and savings rates declining, any shock to consumer confidence could trigger spending pullbacks that force businesses to cut staff more aggressively.

Commercial Real Estate Stress: The combination of remote work and higher interest rates continues to pressure commercial real estate values, particularly office buildings. Distress in this sector could ripple through financial services and construction employment.

Automation Acceleration: Companies investing in AI and automation during 2023-2024 are now deploying those systems at scale, enabling workforce reductions even in sectors showing current growth like retail and logistics.

Conversely, several factors could support continued labor market stability:

• Demographic tailwinds: Baby Boomer retirements continue removing workers from the labor force, reducing competition for jobs
• Infrastructure spending: Continued implementation of federal infrastructure legislation supports construction and engineering employment
• Reshoring trends: Efforts to bring manufacturing back to the U.S. could create new domestic production jobs
• Wage-price spiral risks: If 4% wage growth proves incompatible with 2% inflation, the Fed may need to accept higher inflation or risk triggering recession through aggressive rate hikes

Comparing February to January: A Consistent Trend

February's 117,000 jobs added compares to January's 143,000 positions, suggesting a consistent trend of modest but positive employment growth. This represents a deceleration from late 2024, when monthly gains routinely exceeded 200,000 positions, but it remains above the roughly 100,000 jobs per month needed to keep pace with population growth.

The unemployment rate's increase from 4.0% to 4.1% reverses January's decline, suggesting the January drop was more statistical noise than a genuine tightening of labor market conditions. Both months' unemployment rates remain within the 4.0-4.3% range observed since mid-2024, indicating a labor market in equilibrium rather than rapid change.

The declining job openings tell a more significant story. The drop from 7.74 million in January to 7.6 million in February continues a multi-month trend of cooling employer demand. Job openings peaked at over 12 million in early 2022 and have been declining gradually ever since, suggesting a slow normalization rather than sudden collapse.

The Bottom Line: Gradual Cooling, Not Crisis

The February 2025 employment data reveals a labor market in transition. The combination of below-expectation job growth, rising unemployment, declining job openings, and increasing layoffs all point toward cooling demand for workers. However, none of these indicators suggest imminent crisis.

Job growth remains positive. Unemployment remains low by historical standards. Wages continue growing faster than inflation. Key sectors like healthcare and financial services continue expanding. These are not the characteristics of a labor market in freefall.

Instead, February represents the continued normalization of a labor market that experienced extreme distortions during the pandemic. After the surge in job openings during 2021-2022, the over-hiring in tech and other sectors, and the wage spikes driven by labor shortages, the market is finding a new equilibrium. That equilibrium involves slower hiring, more selective job creation, and employers regaining some negotiating leverage after years of worker-favorable conditions.

For workers, this means the extraordinary opportunities of 2021-2022 (when switching jobs could yield 20-30% pay increases) are fading, but steady employment and modest wage growth remain achievable for those with in-demand skills. For job seekers, competition is intensifying, but opportunities remain available for those who target growing sectors and maintain persistence.

For businesses, this environment rewards strategic workforce planning over opportunistic expansion. Companies that invested in automation and productivity improvements during the tight labor market are now seeing those investments pay dividends through reduced staffing needs.

The key question for 2025 is whether this gradual cooling continues as a soft landing, the best-case scenario, or whether accumulating pressures (policy uncertainty, consumer spending weakness, commercial real estate stress) tip the market into more significant deterioration. The February data suggests we remain on the soft landing path, but the margin for error is narrowing.

For more insights on employment trends and labor market analysis, explore our coverage of recent layoffs, earnings calls, and comprehensive employment intelligence.

Article Updates

This article was originally published on March 7, 2025, based on the BLS Employment Situation report. It has been updated as additional data became available.

April 1, 2025 Update

Updated with comprehensive Job Openings and Labor Turnover Survey (JOLTS) data for February 2025, released by the Bureau of Labor Statistics on April 1\. Key additions include:

• Job openings declined to 7.6 million, down 200,000 from January's revised 7.8 million
• Layoffs and discharges increased to 1.8 million, with federal agencies laying off 18,000 workers
• Quits decreased to 3.2 million, suggesting declining worker confidence
• Hires held steady at 5.4 million
• Total separations remained at 5.3 million

The JOLTS data reinforces the Employment Situation report's finding of a cooling labor market, with declining job openings and rising layoffs indicating employers are becoming more cautious about expansion. The gap between quits and layoffs is narrowing, suggesting the balance of power in the labor market is shifting back toward employers after several years of worker advantage.

March 7, 2025 - Original Publication

Initial analysis based on Bureau of Labor Statistics Employment Situation report showing 117,000 jobs added, 4.1% unemployment rate, and sector-by-sector employment changes. Article included preliminary wage growth data, labor force participation metrics, and sector-specific hiring trends available at the time of the report's release.