February 2025 Jobs Day Forecasts & Preview: Narrow Job Gains vs Reversion Effects From Weather, Seasonals & Natural Disasters

The following post was released to our MacroSuite subscribers subscribers on 2/25/2025. If you'd like to start a 90-day free trial of our exclusive content, you can do so using this link. If you have any questions or would like to see samples of our past content, feel free to get in touch with us.

Feb 2025 Baseline Views (Assume No Revisions)

• Nonfarm Payrolls: +160k monthly gain. We are more concerned than what this benign forecast might imply. Weather, seasonals, and recovery from LA wildfires are likely to be tailwinds in February, and mask the narrow set of sectors powering job growth.
  • We expect to see a print below 100k by Q3 given current policy.
• Average Hourly Earnings: 3.9% year-over-year. AHE has been firm over several months, but given the hours / workweek quirk that suppressed the denominator in January, we expect sharp reversion in February.
  • The low-gross-hire labor market should bring us closer to 3.6% year-over-year by Q3 given current policy.
• Unemployment Rate: 4.1% uptick. While the unemployment rate ticked down to 4.0% in January, some of that reflected a blockbuster household survey unlikely to replicate. There are also some minor residual seasonality issues that have scope to reverse.
  • We expect the unemployment rate to marginally tick up to 4.2-4.3% in Q3 due to slowing job growth; downside cyclical participation effects would be a partial offset in this scenario.

Payrolls Forecast

We are expecting nonfarm payroll growth to come in at 160k, which is also the currently observed 2-Quarter run rate. That growth is powered by some helpful weather-, seasonal-, and disaster-recovery-related tailwinds to sectors like construction and leisure & hospitality.

On the other hand, we are expecting to see underlying slowing in sectors that have powered our narrow set of job gains, like healthcare, state and local government, social assistance, without much real "cyclical" sector offset. We are still dealing with a historically narrow job market in which only a narrow set of sectors are contributing to payroll growth, something you typically only see coincide with rising unemployment and recessions.

This chart looks worse when indexed to what was considered "normal job growth" in the 2010s. Z-score job gains over the last 18 months and you'll see that aggregate job growth is holding up despite most sectors underperforming their 2010s job contributions.

While much attention is paid to the latest news from DOGE, we will also flag that there are other policy-related risks that should warrant more attention over the course of 2025. Healthcare employment has boomed (53k/month) but it was driven by home healthcare work, which is liable to face more headwinds due to shifts in immigration policies.

Meanwhile individual and family services are a major reason social assistance has also been an outperforming contributor to job growth (20k/month).

While the Federal government (+2k/month) is likely to be a headwind to payroll gains due to the change in hiring and retention policies in the new administration, the real drop-off within government employment is more likely to be driven by state governments (+12k/month) and local governments (+18k/month) as post-pandemic catch-up hiring and education adjustments dissipate.

Finally, the real barometer everyone is waiting on: construction. Construction employment has outperformed (+15k/month) most forecasts due to two factors (1) backlogged work from the bottlenecked conditions of 2021-22, and (2) the data center construction boom, which employs a lot of nonresidential specialty contractors. So long as mortgage rates remain elevated (above 6%), homebuilding activity will be a headwind to housing demand and supply-side responses.

As a final wild card, we have to flag that the trajectory of manufacturing employment is vulnerable to more pressure if trade policy uncertainty compounds existing idiosyncratic challenges facing aerospace (Boeing), motor vehicle parts (EV transition), and semiconductors (Intel, for now).

Real-Time Establishment Survey Charts

Topline Data

Sector-Level Real-Time Assessments