The February U.S. jobs report itself was mixed, with job creation at 151,000 ( just below consensus of +160,000), the unemployment rate ticking up to 4.0% from 3.9% last month (even with a 0.2ppt drop in labor force participation rate), and average hourly earnings moderating to +0.3% m/m from +0.4 m/m. However, we think this report will provide some relief to the ‘growth scare’ narrative and be viewed as a settling influence, even though the recent federal government layoffs will show up more prominently in March and over the rest of 2025.
However, we do not want to underestimate the narrative that both President Trump and Treasury Secretary Scott Bessent are signaling: a ‘transition’ is occurring that will impact growth and create volatility. So, we are not waving the ‘all clear’ signal.
That said, we are not forecasting a recession; the cycle will continue. A global easing cycle, strong U.S. productivity, and a compelling technical backdrop will likely keep the glass half full again in 2025.
Where should investors focus in terms of this report? Construction jobs rebounded to 19,000 from 2,000 in the prior month, while manufacturing was 10,000, so the messaging is that it is hard to hurt yourself falling out of a basement window. If you are part of the Trump administration, you will like these trends. However, despite the uptick, our Services over Goods thesis still holds. All told, 106,000 or 76% of total private sector jobs came from the services sector. Of the total 106,000, fully 73% came from Education/ Healthcare. Finally, government jobs are slowing. Whether this slowdown reflects DOGE or the fear of DOGE, government jobs fell to 11,000, well below the run-rate of 38,000, on average, in 2024. Without question, we see this downward trend continuing.
