What to Expect from Today’s NFP Release

We are expecting weak non-farm payrolls for February — even a negative result, although this is not our base case, is within the confidence range of our forecast. The primary reason for our forecast being below consensus is the sudden contraction in hiring by local and state governments.

The end of the Biden-era relief programs at the end of last year created a fiscal gap for state and local governments — the slowdown in hiring was inevitable, regardless of President Donald Trump’s policies. However, the sharpness of this gap was intensified by the Trump administration’s guidance to freeze federal financial aid programs, which disproportionately affected sectors already under budget pressure.

If our forecast is correct, the February employment report (which will be released on March 7) will suggest that the “exceptionality” of the US economy at the start of 2025 was merely the long shadow of pandemic-era fiscal stimulus. With the conclusion of these stimuli and the additional budget uncertainty under Trump, non-farm payrolls for February could surprise to the downside, fueling concerns about US economic growth. And this is before the impact of tariffs, cuts in DOGE, and political uncertainty affect employment — we expect these factors to manifest in the employment data for March and beyond.

We expect February’s non-farm payrolls to show a seasonally adjusted increase of 65 thousand (down from 143 thousand in the previous month), which is below the consensus median forecast of 160 thousand. This corresponds to an unadjusted increase of 831 thousand, compared to the seasonal forecast of 766 thousand. The growth in private sector jobs has likely slowed to 61 thousand (down from 111 thousand previously).

Data from Homebase — the primary input for our employment forecast — shows a significant slowdown in hiring in February, particularly in the professional services and education sectors.

The education sector typically represents around 60% of hiring in a typical February, and Homebase data points to a noticeable slowdown in this sector this year. This is a compelling signal for two reasons:

1. Two relief programs from the Biden era — the Emergency Relief Fund for K-12 Schools (ESSER III) and the State and Local Fiscal Recovery Fund (SLFRF), both part of the American Rescue Plan of 2021 — ended at the end of last year.
2. The Trump administration’s guidance to freeze federal funding led to a covert mini-government shutdown, which intensified budget pressure at the end of ESSER III.

After winter storms in the southern states slowed employment in January, there was likely partial recovery in this region in February. However, we expect storms in the Northeast and Midwest during the reference period of the Bureau of Labor Statistics (BLS) for the month to offset this increase.

The range of forecasts from our models suggests that non-farm payrolls for February could vary from -10 thousand to +120 thousand.

Conclusion: If our forecast is correct, concerns about US economic growth prospects are likely to intensify following the release of the February employment data. Shattering the narrative of “exceptionality” of the US economy, the end of pandemic-era fiscal stimulus and political changes under Trump are revealing fundamental vulnerabilities in the US economy. With additional challenges such as tariffs, DOGE cuts, and political uncertainty expected to show up in future monthly employment reports, the short-term prospects for the economy are looking increasingly bleak.