WASHINGTON, March 6 (Reuters) – U.S. job growth likely cooled in February, with hiring in the healthcare sector expected to return to normal trends after an outsized increase in January, but the unemployment rate is anticipated to have remained steady at 4.3%.
The Labor Department’s closely watched employment report on Friday is likely to project a picture of labor market stability after stumbling in 2025 amid what economists said was uncertainty stemming from President Donald Trump’s sweeping tariffs. It would reinforce economists’ views that the Federal Reserve was in no rush to resume cutting interest rates, especially as the Middle East war threatens to stoke inflation.
Retail gasoline prices have surged by more than 20 cents per gallon since the U.S. and Israel launched air attacks on Iran last weekend, data from motorist advocacy group AAA showed, potentially leaving consumers with less money to spend on other goods and services.
Tehran has retaliated, broadening a war that analysts said was descending into a wider regional conflict. Economists saw a downside risk to the labor market from a prolonged war. The conflict is causing stock market volatility, which economists warned could cause higher-income households, the key drivers of the economy through consumer spending, to cut back.
“We have a job market that is in solid shape, but it’s not as good as it was in 2023 and 2024,” said Gus Faucher, chief economist at PNC Financial. “The war just creates additional uncertainty, businesses are already cautious, and maybe they become even more cautious. The economy is vulnerable.”
Nonfarm payrolls probably increased by 59,000 jobs last month after advancing 130,000 in January, a Reuters survey of economists predicted. Estimates ranged from a loss of 9,000 jobs to an increase of 125,000 positions. In addition to payback in healthcare, a strike by 31,000 healthcare workers in California and Hawaii could also weigh on payrolls.
Healthcare payrolls increased by 82,000 jobs in January, more than double the monthly average of 33,000 in 2025. Economists attributed the abnormal increase to the birth-and-death model, which the Bureau of Labor Statistics uses to estimate how many jobs were gained or lost because of companies opening or closing in a given month.
The BLS updated the birth-and-death model with January’s employment report. Economists estimated that added an extra 70,000 jobs to January’s payrolls. Harsh winter weather could also be a drag on payrolls.
“Our projection of slow employment growth is not a signal of an economic slowdown, but rather it reflects anticipated one-off drags from weather slowing construction payrolls and some payback in healthcare employment,” said Michael Gapen, chief economist at Morgan Stanley.
NEW POPULATION CONTROLS WILL BE INTRODUCED
The BLS will publish new population controls that were delayed by last year’s 43-day government shutdown. Economists expected these would likely show labor supply had been overestimated in 2025 amid an immigration crackdown by the Trump administration. Reduced labor supply has also been blamed for the labor market slowdown.
The Census Bureau last month estimated the nation’s population increased by just 1.8 million people, or 0.5%, to 341.8 million in the year ending June 2025.
“Updated data from the Census Bureau, which feeds into the BLS estimates, suggest that the BLS has been overestimating population growth since late-2024,” said James Egelhof, chief U.S. economist at BNP Paribas Securities.
“We estimate the population aged 16-and-over will be revised down by about 590,000 in the refreshed January data, that the labor force will be revised down by about 370,000, with a similar cut to the level of household survey employment.”
Egelhof said using an experimental BLS series that smoothes for past population controls and immigration, and incorporating the latest vintage of Census Bureau data, BNP Paribas Securities estimated the labor force grew only 900,000 in 2025 and expected overall labor force growth of well below 500,000 in 2026.
The population controls will only impact January household survey data. That means the month-over-month levels of household employment, unemployment and labor force among other metrics will not be directly comparable.
“The good news is that the key ratios, the unemployment rate and labor force participation rate are usually little affected,” said Shruti Mishra, an economist at Bank of America Securities. “Last year, the population control added a tenth to both, and this year the risk is that the new controls skew these ratios slightly lower.”
The population controls will likely show the economy needed to create fewer than 50,000 jobs per month to keep up with growth in the working-age population, economists projected.
Still, they saw an upside risk to the unemployment rate rising back to 4.4% in February, but would not view that as a worrying sign. The U.S. central bank is expected to keep its benchmark overnight interest rate in the 3.50%-3.75% range at its March 17-18 meeting.
Rising crude oil prices have heightened worries that inflation pressures would keep the Fed in a hawkish posture.
“It’s a still historically low unemployment rate, it’s right around where the Fed thinks it should be over the longer run,” said PNC Financial’s Faucher. “If we see the unemployment rate start to break to the upside, get to 4.6%, then I’m starting to get a little more anxious.”
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama )
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