U.S. Labor Demand Dropped in February and Has Remained Stagnant Since December - Yet Another Indicator of a Defunct Job Market
Labor demand since the beginning of the year is flat - well below the typical pattern that one would expect to see in the beginning of the year in a normally-functioning economy
It’s been a bit longer than expected since our last post, although certainly not for lack of news on the job market, the economy, and the world in general. On the latter, while the horrors in Minneapolis have subsided to a large degree (though not entirely) since the administration retreated in utter defeat, things around the rest of the country and the world continue to descend into the abyss. The volume, pace, and magnitude of decimation on all fronts has become what Timothy Morton would call a Hyperobject - something so vast that it is incomprehensible.
As such, I’ll resort to taking just a single paragraph from a NYT Opinion piece yesterday entitled “Historians Confirm: Tomorrow Won’t Be Better Than Today” by Ian Buruma, author of Stay Alive: Berlin, 1939-1945, Buruma writes:
Since [November 2024] one red line after another has been crossed: Undocumented immigrants are called animals; civilian boats are blown out of the water; American citizens are gunned down in the streets and then accused of being domestic terrorists; universities, news organizations and law firms are being bullied and blackmailed; and refugees are deported to countries whose languages they probably don’t even speak. And that is aside from the blatant corruption of family and cronies.
To that list, we could, of course, add endlessly but just to start, we’d include a new war in the Middle East, a weaponized judiciary, efforts to build a massive network of prison camps across the country, endless attacks on Fed independence, rising imperialism, a decimated NATO, and threats to federalize elections or cancel them altogether, to name just a few.
All of that contrasts sharply, to a grotesquely absurd degree, with last week’s State of the Union speech. Leaving aside approximately 100 minutes of that debacle, we’ll focus solely on the economy, to which Trump awarded himself an A+++++.
And here again, we’ll leave aside accelerating inequality, worsening affordability, persistent inflation, tariff chaos, extreme uncertainty, rising cronyism, alarming state capitalism, horrifically low consumer confidence, slowing GDP growth, and slowing consumer spending and focus specifically on the job market which, by all measures, is failing miserably.
Even the WSJ gives the job market a grade of ‘Needs Improvement’ noting that “It is rough out there for job seekers, unless they are looking for work in healthcare. U.S. employers added only 181,000 jobs in 2025, down sharply from the prior year to the lowest figure outside of a recession in more than two decades.”
Unemployment has remained low, but as we noted on January 5th and then again in late January, with the administration’s nativist policies and mass deportations, labor supply has plummeted and unemployment has essentially become a useless indicator of what’s actually going on in the job market.
As far as income is concerned, wage growth is anemic and real wage growth after adjusting for inflation is effectively zero.
So ‘Needs Improvement’ is being overly generous, to put it mildly. As we titled our post on January 19th, the U.S. economy as a jobs creating machine has been shut off. As the chart below illustrates, average monthly job gains in 2025 dropped 75% from 2024 and January’s initial release notwithstanding, the downward trend continues.
And as horrific as the ‘Official’ data is, it might actually be worse. As the Financial Times recently noted:
Fed governor Christopher Waller said at a conference in Washington on Monday that official data from the Bureau of Labor Statistics — which shows job creation fell to an average of 15,000 new positions a month last year — contained an “upward bias”. Waller said, accounting for the likely further revision in those figures next year, it seemed “clear that payroll employment in the United States probably fell in 2025”. Declines in payrolls have rarely occurred outside of recessions, according to data stretching back to 1939. Waller said in the speech it was “only the third year that has happened since 1945”.
The Fed governor warned that the BLS report for January might have contained “more noise than signal” about the future health of the US labour market. Job gains were, he said, concentrated in healthcare and construction — sectors that constitute only about 20 per cent of total employment. “Many other sectors lost jobs, more consistent with what happened in 2025,” the Fed governor said. “All this does not suggest the whole labour market is heading for a more robust footing.”
In the same speech, Waller remarked that “the job market over 2025 was “weak” and “fragile.” We’d call it defunct.
So returning back to the initial jobs release for January (+130,000 jobs), the other thing the chart above highlights is that the average revision between the BLS initial release and its final release was -53%. Taking into account the Annual QCEW Adjustment, the average initial release was reduced by 85%. Using those averages, January’s jobs report will, by April, likely be reduced to a net gain of somewhere between 20,000 to 65,000 jobs.
Shockingly, everyone took January’s report at face value as it reinforced the widely-held consensus view that the job market is fine. So in addition to a math problem, the nation also suffers from an attention deficit problem, an epidemic that has apparently spread overseas.
As Michael Strain wrote in a February 16th Financial Times piece entitled “Everything you thought you knew about the US labour market is wrong”:
Markets, economists and Federal Reserve officials seem to believe that the US labour market spent most of last year weakening. On [that] point, the conventional view is probably wrong.
The holes in the consensus narrative were clear before last week’s jobs report, which surprised many analysts on the upside. In January, the economy added 130,000 net new jobs and the unemployment rate declined by 10 basis points to 4.28 per cent.
But December’s 4.38 per cent unemployment rate was already very low. And the jobless rate — which was 4.3 per cent or higher for six months last year — had not been displaying a worrying upward trend. In addition, the rate at which employers are laying off workers has been flat since 2023. And according to my calculations, aggregate labour supply and demand are roughly in balance and have been relatively stable over the past year. Monthly headline payroll gains — which trended down throughout 2025 — ostensibly tell a different story.
But this reduction is mostly due to large declines in net migration. The conventional view of labour market weakening has struggled to contend with robust economic growth.
Needless to say, we couldn’t possibly disagree more and of course, we’ll see how this all plays out. To be certain, our crystal ball is no better than anyone else’s; But we do have an alethiometer in the form of a very powerful and forward-looking dataset of job openings sourced every day directly from company and employer websites around the world that we’ve leveraged effectively to, among other things, forecast non-farm payrolls since 2010.
Looking at our U.S. data for February, total job vacancies indexed from employers globally dropped 1.7% while new job vacancies fell 5.6%. Job Openings in the U.S. are now precisely where they stood at the end of December - well below the normal hiring patterns in a functioning economy when labor demand typically rises in the first quarter of the year.
Total and new openings dropped in nearly every state.
Labor demand rose again in Manufacturing but fell in services declined in both blue and white collar occupations.
Drilling into the detail, both industries and occupations were pretty evenly split between those that saw an increase in labor demand versus those that saw a decline.
Based on LinkUp’s January data, combined with our expectation that January’s Initial Release for January will be revised down, we are forecasting a net gain of 70,000 jobs in February - slightly above consensus estimates of 60,000 jobs.
And with February’s decline in labor demand, our preliminary view is that job gains in March will be even weaker. As noted above, the U.S. job-making machine is beyond broken. It might even be beyond repair.