US Private Payrolls Slow Sharply in February: Tariffs and Hiring Freeze Take a Toll

In February, the US private payrolls growth slowed sharply, with economists expecting a gain of 135,000 jobs, significantly lower than the initial 143,000 seen in January. The slowdown was primarily driven by a decrease in public sector hiring, but the private sector also felt the pinch from recent tariffs and a hiring freeze in the federal workforce.

The public sector was expected to add only 20,000 jobs in February, a significant decrease from the 32,000 jobs added in January. This slowdown was likely due to the hiring freeze and job offer rescissions implemented by the new administration during the first couple of weeks. This contributed to the overall slowdown in payroll growth.

However, the private sector's contribution to the slowdown was more nuanced and sector-specific. The private sector was still expected to add jobs, with an estimated 115,000 jobs added in February, close to the 111,000 jobs added in January. But there were some factors at play:

* Healthcare and Social Assistance: This sector was expected to continue driving overall gains, but the extent of its contribution was not specified in the provided information.
* Leisure and Hospitality: This sector was expected to rebound after losing ground following the fires in Los Angeles. However, the key issue was whether immigrants would show up for these jobs, as the administration had revoked the asylum status of nearly one million Venezuelan and Haitian refugees, which might have kept them from working or filling vacancies.
* Manufacturing: This sector was expected to add about 5,000 workers in February, on the heels of somewhat stronger vehicle production. However, any front-running to tariff changes and tax credits for electric vehicles will pull from demand later in the year.

The recent tariffs imposed by the Trump administration are expected to have a negative impact on hiring trends in the private sector, particularly in industries that are heavily reliant on international trade. According to Ryan Sweet, chief economist at Oxford Economics, the tariffs will lead to a rise in the unemployment rate due to layoffs and less hiring (Sweet, 2025). This is in contrast to the previous increase in unemployment last summer, which was attributed to new and reentrants into the labor force rather than actual job losses (Sweet, 2025).

The industries most affected by the tariffs are those that are heavily involved in international trade, such as manufacturing, retail, and transportation. The tariffs on Canada, Mexico, and China, which were put into action on Tuesday, are expected to drag down economic growth, stoke inflation, and cause layoffs that will become evident in future economic data (Dow Jones Newswires & The Wall Street Journal, 2025). S&P Global estimated last month that Trump's tariffs would push the unemployment rate up by 0.2 percentage points (Dow Jones Newswires & The Wall Street Journal, 2025).

In the manufacturing sector, for example, the tariffs are expected to have a significant impact on hiring. The manufacturing industry is heavily reliant on international trade, and the tariffs are likely to disrupt supply chains and increase production costs, leading to job losses in the sector. The vehicle sector, in particular, is expected to be affected by the tariffs, as consumers have been buying ahead of proposed changes in tax laws and potential tariffs (Sweet, 2025). However, any front-running to tariff changes and tax credits for electric vehicles will pull from demand later in the year, which could also impact hiring in the sector.

In the retail industry, the tariffs are likely to increase the cost of goods, which could lead to reduced consumer spending and job losses in the sector. The tariffs on China, in particular, are expected to have a significant impact on the retail industry, as many retail products are imported from China.

In the transportation industry, the tariffs are likely to disrupt international trade and increase transportation costs, leading to job losses in the sector. The tariffs on Canada and Mexico, in particular, are expected to have a significant impact on the transportation industry, as these countries are major trading partners with the United States.

Overall, the recent tariffs imposed by the Trump administration are expected to have a negative impact on hiring trends in the private sector, particularly in industries that are heavily reliant on international trade. The manufacturing, retail, and transportation industries are likely to be the most affected by the tariffs, leading to job losses and a rise in the unemployment rate.

The hiring freeze and job offer rescissions in the federal workforce did not have a significant impact on the overall slowdown of private payroll growth in February. According to the information provided, the entire federal labor force other than the military is only 3 million people, compared to the overall civilian workforce of 171 million. Economists at Goldman Sachs estimated that the layoffs reduced job growth in February by only 10,000. This small impact on the broader economy is reflected in the expected job growth for February, which is close to the initial 143,000 seen in the January employment report.

In conclusion, the slowdown in US private payrolls growth in February was primarily driven by a decrease in public sector hiring, but the private sector also felt the pinch from recent tariffs and a hiring freeze in the federal workforce. The manufacturing, retail, and transportation industries are likely to be the most affected by the tariffs, leading to job losses and a rise in the unemployment rate. Investors should keep a close eye on these industries and the broader economy as the impact of the tariffs and hiring freeze continues to unfold.