Total non-farm payroll employment rose by 151,000 in February. The unemployment rate barely changed at 4.1%, according to today’s report by the U.S. Bureau of Labor Statistics. Employment trended up in health care, financial activities, transportation and warehousing, and social assistance. Federal government employment declined.
My jobs growth forecast for 2025 is between 133,000 and 151,000 jobs. Currently, we have an average of 138,000 jobs created each month in 2025. In the coming months, we will see if the U.S. economy can withstand job losses in the government sector, reduced spending in the economy, and a housing market on the brink of losing residential construction projects. These factors would drive the unemployment rate above 4.3% — the line in the sand for the Fed.
Since government jobs were a significant contributor to job growth data last year, achieving similar results in 2025 will be challenging. It’s important to distinguish between federal workers and state and local government job hiring. However, with reduced economic spending, we expect government employment to be less of a growth factor in the employment data. This leads us back to the private sector and residential construction jobs. We didn’t observe any real growth in this category in the recent report, and the chart below illustrates how critical this sector is to the overall economic cycle.
Builders face stress from rising mortgage rates and the threat of higher lumber tariffs, leading to a significant decline in their confidence data.
I recently discussed this in an interview with Yahoo Finance. We have identified two sectors at risk in 2025; one is about to report significant job losses. The question is whether the private sector can absorb some displaced government workers effectively. Additionally, can mortgage rates decrease toward 6% to support builders?
As we head into the rest of the year, keep the following in mind: If job growth slows below 133,000 jobs per month and labor force growth data remains elevated, unemployment will rise above 4.3%. The Fed has kept the target unemployment rate low so that the bond market can understand the limits of pain in the labor market before it decides to intervene.
Additionally, the housing market tends to improve when mortgage rates decline from 6.64% to 6%, so we are approaching a critical point with interest rates. However, it’s essential to focus more on labor trends than inflation and consider the private sector and residential construction jobs as we look toward 2025.
In the past, mortgage rates have fallen to help the builders keep things intact, but 2025 is much different than the past few years , and supply and margin pressures are impacting their business model.
First Time Home Buyer FAQs - Via HousingWire.com
