U.S. employers continued to add jobs last month, but layoff notices have also increased to their highest level since the early months of the COVID-19 pandemic.

U.S. employers continued to add jobs last month, but layoff notices have also increased to their highest level since the early months of the COVID-19 pandemic. / Getty Images

The U.S. job market held steady last month — but there are warning signs of possible weakness ahead.

Employers added 151,000 jobs in February, according to a report on Friday from the Labor Department — a number that showcases continued growth in the labor market. But the unemployment rate inched up to 4.1%, despite a shrinking workforce.

Jobs were added last month in health care, construction and manufacturing, while the federal government cut 10,000 jobs. Meanwhile, average wages in February were up 4% from a year ago. Wage gains have been outpacing inflation for nearly two years.

Employment gains for December and January were revised down by a relatively muted total of 2,000 jobs.

Federal government turmoil

Although the employment totals look pretty healthy on the surface, the monthly report is based on surveys conducted three weeks ago, so it reflects only a fraction of the layoffs in the federal government and the private sector.

The outplacement firm Challenger, Gray & Christmas, which tracks job cuts, says employers announced more than 172,000 layoffs in February. That's the largest monthly total since July 2020, in the early stages of the coronavirus pandemic. The layoffs include more than 62,000 job cuts announced by the federal government across 17 agencies.

"This is a really big number in terms of what we've ever recorded," said Andrew Challenger, senior vice president at the firm. "The fact that we've reached that level so quickly this year is surprising to us and certainly something worth taking note of."

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Many more government jobs could be on the chopping block as the Trump administration tries to radically downsize the federal workforce. The IRS and the Department of Veterans Affairs are each reportedly planning to lay off tens of thousands of additional workers in the near future.

"This is like putting a hole in the boat and you don't have any life rafts or anything," said Eddie Walker, who represents about 1,500 unionized IRS workers in Austin, Texas.

The tax collection agency cut more than 6,000 jobs in February — mostly probationary workers who had been with the IRS for less than a year.

"Of course, there's a lot of crying," Walker said. "I'm looking at some of the emails I've got, like, 'They're ripping apart my work family.' 'I left a job of 13 years to come here, and what do I get?' 'How am I going to survive? I'm a single mom.'"

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Private employers are announcing layoffs too

The job cuts in the federal government have made headlines. But private-sector businesses have announced even bigger layoffs.

"There's just been this extra uncertainty that's entered into some industries around tariffs, around potential trade wars," Challenger said. "We're seeing big announcements from very large Fortune 500 companies this month that are tuning down their growth forecasts for the next three or four years."