U.S. jobs cuts at 16-year high as trade war concerns hammer sentiment

U.S. employers unveiled the steepest job cuts in five years last month, according to a benchmark report published Thursday, as the impact of DOGE-related firings and a pullback in consumer spending continues to dent labor market demand in the world's biggest economy. 

Challenger Gray & Christmas said U.S. companies announced more than 172,000 layoffs last month, the highest February tally since 2009 and the biggest monthly total since the summer of 2020. The February total was more than three times higher than January's 49,795 and double the level seen in February of last year.

Around 62.242 jobs were lost in the government sector, the report indicated, with around 17 different agencies reporting layoffs over the past month. Last February, that total was a mere 151 jobs. Nearly 39,000 jobs were also lost in the retail sector, with around 14,500 layoffs unveiled in the technology sector.

Collectively, the 221,812 layoffs announced so far this year are the highest since 2009, and a 33% increase from the same period in 2024.

"With the impact of the Department of Government Efficiency [DOGE] actions, as well as canceled Government contracts, fear of trade wars, and bankruptcies, job cuts soared in February,“ said Andrew Challenger, senior vice president and workplace expert at Challenger Gray.

“It appears the administration wants to cut even more workers, but an order to fire the roughly 200,000 probationary employees was blocked by a federal judge," he added. "It remains to be seen how many more workers will lose their Federal Government roles.”

Earlier this week, payroll processing group ADP reported weaker-than-expected private sector hiring of around 77,000 over the month of February, suggesting tariff uncertainty and a pullback in consumer sentiment is having an impact on hiring into the early months of the new Trump administration.

“Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” said ADP's chief economist Nela Richardson, chief economist. “Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.” 

Related: U.S. consumers are wilting under renewed stagflation risks

The Labor Department will publish its benchmark February non-farm payrolls report Friday, with investors looking for a hiring gain of around 156,000 and a headline unemployment rate around 4.1%.

Job market weakness is just one component of the boarder concerns economists have regarding the pace of U.S. growth over the first two months of the year. 

Consumer sentiment surveys have shown notable pullbacks over the month of February and key readings of manufacturing and services sector activity have shown muted advances at best and rising concerns over the impact of tariffs on both factory gate prices and overall customer demand.

The Federal Reserve's Beige Book of activity around the central bank's twelve reporting regions, meanwhile, noted that while "overall expectations for economic activity over the coming months were slightly optimistic", several respondents noted an increase in tariff concerns and worries over future labor demand. 

The Atlanta Fed's GDPNow tool, a real-time tracker of the U.S. economy, is currently projecting a 2.8% first quarter contraction following its last update on March 3.

More Economic Analysis:

• U.S. consumers are wilting under renewed stagflation risks
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Some analysts, however, feel the Atlanta Fed's reading overstates the current quarter weakness, and expect a more balanced reading as data arrives over the coming weeks. 

"GDPNow is a tracking model which forecasts growth mechanically based on the data available for the quarter so far," said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. 

"This is often a useful approach, but it inevitably means forecasts early in the quarter are based on little data," he added. "Most, but not all, the major series for January have been released, but very little data for February are available and March has barely begun, leaving a great deal of room for error." 

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