The U.S. economy lost 92,000 jobs in February, the Bureau of Labor Statistics reported Friday, marking the first negative payroll print since December 2020 and dramatically undershooting the consensus forecast of 120,000 new jobs.

The unemployment rate ticked up to 4.3 percent from 4.1 percent in January. More troubling to economists, the labor force participation rate declined for the third consecutive month, suggesting that workers are leaving the job market rather than simply between positions.

Government Layoffs Drive the Headline

Federal government employment contracted by 48,000 positions, reflecting the administration’s ongoing workforce reduction initiative across multiple agencies. The Department of Education alone shed approximately 3,800 positions in February, part of a broader reorganization that has drawn legal challenges from public employee unions.

Private sector employment was also weak, declining by 44,000 jobs. Construction shed 18,000 positions as higher interest rates continued to weigh on residential building activity. Manufacturing lost 12,000 jobs, with automotive suppliers particularly hard hit by uncertainty around the latest round of tariffs on imported auto parts.

Wage Growth Decelerates

Average hourly earnings grew 3.1 percent year-over-year, down from 3.4 percent in January and below the rate of inflation for the first time since mid-2024. In real terms, American workers are seeing their purchasing power erode—a dynamic that could weigh on consumer spending in coming months.

The weak jobs report adds pressure on the Federal Reserve, which must now balance the risk of overtightening against still-elevated inflation. Markets have moved to price in a rate cut at the June meeting, though Fed officials have pushed back against that timeline.