Economists are warning that the U.S. labor market and broader economy are on shaky footing after recent data showed employment conditions deteriorated last month—fragilities they believe will be exacerbated by the conflict now unfolding in the Middle East.
On Friday, the Bureau of Labor Statistics revealed that the economy lost 92,000 jobs in February, despite analysts having penciled in a 59,000 gain, as the unemployment rate ticked up to 4.4 from 4.3 percent.
“The economy is struggling. Job growth has stalled, and unemployment is increasing,” Mark Zandi, chief economist at Moody’s Analytics, posted to X on Sunday, adding that all this has occurred “before the fallout from the U.S. conflict with Iran hits the economy.”
And according to Justin Wolfers, professor of economics the University of Michigan, the U.S. now finds itself in “a jobs recession.”
Why It Matters
Prior to Friday’s report, confidence in the direction of the U.S. labor market had been building, thanks to a better-than-expected reading for January that analysts said lessened concerns of an imminent downturn.
But as Wolfers and Zandi highlight, the latest figures upset this narrative, especially now that Operation Epic Fury threatens to add to the economic difficulties facing Americans—including by driving up gas prices and inflation expectations, and complicating the task of policymakers as they try to protect employment while containing price growth.
What To Know
Losses occurred across most sectors last month, according to the BLS reading, with federal government employment, manufacturing and health care—for months considered the engine of U.S. job creation—shedding payrolls and contributing to the 92,000 decline.
While the prior, January report came in ahead of expectations with the addition of 130,000 jobs—trimmed to 126,000 on Friday—revisions to past months’ data also revealed far weaker job creation through 2025 than had been initially reported.
Kevin Hasset, director of Trump’s National Economic Council, said Friday’s figures came as “something of a surprise” in an interview following the release, attributing the weak reading to strikes, immigration enforcement efforts, new statistical collection methods and weather impacts. He added that other indicators continue to show the U.S. economy “is really strong.”
But the report was roundly viewed by analysts as weakening the country’s economic outlook, with Wolfers saying this had raised “real questions about whether the U.S. economy is in a recession, or whether we’re merely on the cusp of a recession.”
And adding to these concerns over jobs growth—in net negative territory from May of last year—Zandi said that prospects for “consistent job losses have risen amid the turmoil in the Middle East and the resulting surge in oil and natural gas prices.”
“Low and middle-income Americans, who spend a larger share of their budgets on gasoline and many of whom have little to no savings, will be forced to make some tough financial choices,” he posted to X.
What People Are Saying
Justin Wolfers, speaking to MS NOW following last week’s employment report: “What we learned is that the U.S. economy is on the precipice of a recession, or there’s some possibility we’re already in one. Things were much worse than we anticipated even just a day ago. And then…the other thing you would have noticed is we’ve started a war with Iran, and that creates all sorts of economic gyrations beyond the geopolitical and security ones, which means that things are very much at risk. If you saw an economy teetering on the brink, the only advice I’d give the administration is, ‘Don’t do anything rash. Don’t do anything silly.’ I have a feeling that advice may have come a week too late.”
What Happens Next
Zandi said that the One Big Beautiful Bill tax package, signed into law by Trump in July, will provide some “fiscal stimulus…and temporarily support the economy in the next few months.” However, he added that, “with job losses and higher unemployment increasingly likely, it will be an uncomfortably fragile growth.”
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