Economy adds fewer jobs than expected in February 2025, with trade tariff uncertainty looming large

Experts expected the U.S. economy to add 160,000 jobs in the month of February, but it fell a bit short at 151,000. As President Trump’s Department of Government Efficiency (DOGE) attempts to end a swath of federal government-related jobs, CEI experts say that’s not a big factor so far.

Ryan Young, CEI senior economist:

This month’s job report could be a turning point. Ever since the pandemic recovery, job growth has roughly tracked population growth, as is typical when the economy is at near full employment. A typical reading in recent years has been over 200,000 jobs created per month. That slowed down to 151,000 in February. The biggest reason is uncertainty about tariffs.

Companies are dealing with multi-billion-dollar tariff announcements with almost no notice. Some of these tariffs get enacted. Some are withdrawn partially or entirely at the last minute. Other tariffs are delayed, sometimes multiple times. This snarls supply networks, creates shipping backlogs, makes already-signed contracts difficult to fulfill, and discourages long-term investments. Retaliatory tariffs may double these self-inflicted problems.

There are some mitigating factors that make February’s report slightly less concerning. Government employment went down by 10,000 workers, due in part to DOGE-related layoffs. Additional DOGE-related job losses likely occurred at government contractors that are technically in the private sector, though it isn’t yet clear how many.

To the extent that those lost jobs are ones with low productivity, the economy will benefit as those workers find new jobs where they create value. That said, DOGE’s chaotic, politicized approach means that it isn’t always targeting the right jobs to cut.

While the labor market remains at roughly full employment and net employment is still growing, leading economic indicators point to trouble ahead. Some certainty on tariffs and regulatory relief would help calm the storm. The Federal Reserve’s next interest rate meeting in two weeks will be more eventful than usual.

Sean Higgins, CEI labor policy expert:

The noteworthy news in Friday’s Labor Department report is the dog that didn’t bark: Federal job losses. For all the attention and headlines devoted to President Trump and Elon Musk’s efforts to downsize the government, those efforts aren’t yet reflected in the official numbers. Overall federal government employment in February was down by just 10,000 from January and is actually up 32,000 from where it was a year ago. 

Trump and Musk’s efforts have thus far just scratched the surface and other parts of the government continue to grow. In any event, the reductions had a negligible impact on the broader economy. That may yet change: The reported 75,000 federal workers who opted to resign would not automatically be counted as unemployed if they weren’t actively looking for replacement jobs; and legal actions attempting to block other downsizing efforts will keep those jobs in limbo for a while. It may be several more months before the real impacts of the Trump/Musk efforts become fully apparent.