MBA Chart of the Week: Monthly Payroll Growth, Unemployment Rates

Source: Bureau of Labor Statistics

The job market softened somewhat in February, with the unemployment rate increasing to 4.1%, the pace of private sector job growth up by 140,000, and wage growth steady at 4%. Federal government employment declined by 10,000 over the month, a number that is likely to increase in future months, given the announced plans for reductions in force.  Private sectors that drove this month’s growth included health care, financial activities, transportation and warehousing, and social assistance. Construction employment also saw an increase with a 19,000 gain; the largest increase in six months. Residential contractors accounted for most of that increase although this comes after four months of declines.   

Beyond these headline numbers, there was a marked increase in broader measures of unemployment, with the U-6 increasing half a percentage point over the month to 8%, which was the highest rate seen since 2021. The U-6 metric measures underemployment or labor underutilization as it captures the number of individuals who took part-time jobs when they would have preferred full-time work or were otherwise underemployed. The sizable February increase suggests that the underlying job market is somewhat weaker than the headline numbers suggest.  MBA’s forecast is for job growth to slow in 2025 relative to last year and for the unemployment rate to increase close to 4.5% by the end of the year.

The February data came in quite close to market expectations and hence should not result in much change concerning Fed policy in the coming months. MBA anticipates that the Fed will keep their target rate steady through the next quarter but will likely cut one more time this year as inflation moves slowly toward the 2% target and the job market continues to soften.

–Mike Fratantoni (mfratantoni@mba.org); Joel Kan (jkan@mba.org)