The U.S. added 151,000 jobs in February, slightly below the expected 160,000. Meanwhile, the unemployment rate rose to 4.1%, the highest since November 2024, exceeding both forecasts and January's 4.0%.

Average hourly earnings grew 0.3% month-over-month, in line with expectations.

After NFP report, U.S stock futures initially jumped after the report but later erased gains, turning negative as bulls and bears fiercely contested market direction. Wall Street opened slightly lower, with stocks attempting a modest rebound in early trading.

The U.S. dollar index (DXY) fell sharply, dropping 0.56% to 103.6, approaching its lowest level since November 2024. A break below this level could bring a direct test of the 100 mark.

Gold remained stable, while silver dropped nearly 2%, pressured by weaker employment data given its industrial demand component.

Sector Breakdown: Healthcare Strong, Retail and Hospitality Weak

Healthcare led job gains with +52,000 new positions. Transportation & warehousing added +18,000 jobs, emerging as another key driver. Retail lost 6,000 jobs, while leisure & hospitality declined by 16,000, reflecting weak consumer demand. 

Federal government employment saw its steepest drop since June 2022 due to Musk's aggressive efficiency reforms.

Fed Rate Cut Expectations Adjusted

Following the NFP release, markets scaled back expectations for a Fed rate cut in May, now favoring June as the likely start of policy easing.

Despite heightened uncertainty from Trump's economic policies, traders still expect 75 basis points of rate cuts in 2025.

Analysts' Views: Federal Job Cuts to Weigh on Future Reports

1️⃣ Government Layoffs Yet to Show Full Impact

Economists believe Musk's government workforce reductions have not fully appeared in February's NFP. Third-party data suggests that 63,583 U.S. government employees were laid off in February. Unemployment claims among federal workers have already risen. In addition to direct layoffs, Trump's hiring freeze (effective Jan 20) has frozen thousands of public-sector job openings.

2️⃣ Spending Drops in Washington D.C.

Government job cuts have led to a decline in consumer spending. bank of america data shows a notable slowdown in credit card spending in Washington D.C., where federal employees are concentrated.

3️⃣ Corporate Layoffs & Economic Pressure on Workers

Goldman Sachs and disney recently announced large-scale layoffs, which were not included in February's unemployment rate. Along with government job losses, this could drive higher unemployment in the coming months. 

The latest data shows: Low-education workers (without a high school diploma) were hit hardest. Part-time employment due to economic hardship surged to its highest level in four years.

Long-Term Impact: Job Market Faces Structural Shifts

Government Cuts & Immigration Policies Could Suppress Hiring

Musk's government downsizing, reduced spending, and Trump's strict immigration policies could limit job growth. However, some businesses praise Trump's tax cuts and deregulation, which may boost hiring. The White House argues that tariffs will bring back U.S. manufacturing jobs, while government streamlining will enhance long-term efficiency.

Inflation and Consumer Spending: A New Risk

Sticky inflation remains a concern, and consumers are cutting back on spending. If inflation persists and consumer demand weakens, companies may further slow hiring.

Final Thoughts

While February's job growth slightly missed expectations, rising unemployment and government layoffs could pose larger risks in the coming months. The labor market is at a turning point, with policy shifts, economic uncertainty, and corporate layoffs shaping the outlook.