U.S. employers likely added jobs at a moderate pace in February, as federal government layoffs and weakening consumer spending weighed on the labor market. According to economists surveyed by Bloomberg, payrolls rose by 160,000 in February, up slightly from January’s 143,000 gain but still softer than late 2024. The unemployment rate is expected to hold steady at 4%.
Federal Reserve Watching Labor Market Trends
Friday’s jobs report from the Bureau of Labor Statistics will provide key insights for Federal Reserve officials as they assess labor market momentum. The labor market has been a critical support for household spending and the broader economy, though recent government policy shifts are introducing new risks.
Elon Musk’s Department of Government Efficiency has pushed for aggressive federal workforce reductions, adding uncertainty to the economic outlook. “Softening sentiment, a contraction in spending, and downward revisions to first-quarter GDP growth expectations—data in the past week have stirred growth fears,” Bloomberg economists noted.
Government Policy and Market Reaction
Fed Chair Jerome Powell is scheduled to speak at a monetary policy forum on Friday, where he may provide insights into the central bank’s next steps. Policymakers are set to meet on March 18-19, with expectations they will hold interest rates steady as they monitor labor and inflation trends.
Additionally, Treasury Secretary Scott Bessent will address the Economic Club of New York amid concerns that President Donald Trump’s early policy measures—including proposed tariffs—could disrupt economic momentum.
Rising Tariff Concerns
The Trump administration is preparing to impose 25% tariffs on imports from Canada and Mexico starting March 4. The announcement coincides with Trump’s address to a joint session of Congress, where he may introduce additional policy changes. Businesses are bracing for potential supply chain disruptions and higher costs.
Some of these risks are already affecting consumer sentiment. Recent surveys show declining optimism about business conditions and the labor market. Figures from the Institute for Supply Management and S&P Global will provide further clarity on whether manufacturers and service providers are seeing order slowdowns.
Impact of Federal Layoffs
February’s jobs report may begin to reflect the effects of a federal hiring freeze, though thousands of public-sector job cuts occurred too late in the month to have a major impact. While federal jobs make up a small share of overall payrolls, spending reductions could ripple into private-sector industries that depend on government contracts and funding.
Canada and Global Economic Developments
Canada is actively seeking to negotiate exemptions from U.S. tariffs, with government officials expected to ramp up diplomatic efforts this week.
On the data front, Canada’s international trade report may reveal a surge in exports to the U.S. as businesses rushed to ship goods ahead of the tariff deadline. Additionally, February employment data may show continued strength in manufacturing jobs as companies adjusted to policy uncertainty.
Meanwhile, global markets are also watching key economic developments, including China’s manufacturing performance, inflation readings from Australia, Switzerland, and Mexico, and expected interest rate cuts from the European Central Bank and Turkey.
Conclusion: An Uncertain Economic Outlook
The combination of slowing job growth, shifting government policies, and rising trade risks presents a challenging economic landscape. The Federal Reserve is likely to remain cautious as it assesses how these factors impact inflation and overall growth.
