This week’s nonfarm-payrolls report for February will be closely watched by investors nervous about the health of the consumer and the U.S. economy
Angst over the health of the U.S. economy has investors nervous about the possibility of an approaching recession – and the next big jobs report may not be enough to calm nerves for very long.
That’s because investors and traders will be eyeing Friday’s nonfarm-payrolls report for February through the lens of recent developments that have led to mounting fears about consumer demand and a potential economic downturn, triggering notable drops in stocks and Treasury yields.
Those developments include sinking consumer confidence in a Conference Board report on Feb. 25; signs of a contraction in a key S&P Global survey of services-sector activity on Feb. 21; and disappointing earnings guidance from Walmart Inc. (WMT) on Feb. 20.
“Investors are on edge, so it wouldn’t take much to trigger a full-blown correction,” said Brian Jacobsen, chief economist at Annex Wealth Management in Wisconsin, which manages about $6.5 billion in assets. “If the jobs number is slightly weak, the fear is that disruptions from tariffs could turn slight weakness into something more severe.”
Read: Risk of a stock-market correction is rising, Goldman Sachs warns
U.S. stocks finished higher on Friday after an inflation reading from the personal-consumption expenditures price index met expectations for January. Over the past two weeks, however, major indexes have moved closer to the magnitude of declines required for a correction – which is defined as a decline of at least 10%, but less than 20%, from a recent high. As of Friday, the S&P 500 SPX was down 3.1% from its record high of 6,144.15, reached on Feb. 19. The Nasdaq Composite COMP was down 6% from its 2025 high of 20,056.25, recorded that same day.
February’s nonfarm-payrolls report is expected to reflect a gain of 160,000 jobs, up from 143,000 in January, according to the consensus forecast reflected on FactSet. The unemployment rate is expected to remain at 4%, while average hourly earnings are forecast to slip 0.3% on a monthly basis, from 0.5% previously.
Overall, expectations for Friday’s job gains are wide. Bradley Saunders of U.K.-based Capital Economics foresees a 170,000 gain in jobs for February. By contrast, Thomas Simons of Jefferies said his New York-based firm is expecting only an increase of 115,000 to 120,000 jobs, after initially estimating fewer than 100,000.
Meanwhile, Ryan Jacobs, founder of Florida-based advisory firm Jacobs Investment Management, said a surprisingly positive jobs report will likely lead to only a temporary improvement in investor sentiment, while a negative jobs report could be seen as “the tip of the iceberg” and result in a stock-market correction within a couple of quarters.
Fears of a snowball effect
Jefferies’ Simons and Annex Wealth’s Jacobsen are among those who are leaning toward the possibility that Friday’s jobs data will come in below expectations.
Jacobsen described the Feb. 21 release of the S&P Global’s services-sector purchasing managers’ index – which fell below 50 – as a “shot across the bow” that leaves him biased toward a downside outcome on Friday, which could produce a selloff in U.S. stocks and a drop in Treasury yields. He expects a nonfarm-payroll reading closer to 125,000 and sees job gains falling below 100,000 in the March report that arrives on April 4.
“My fear is that any slowdown could snowball into something worse,” Jacobsen said. “We no longer have a wave of positive consumer sentiment to ride.”
Even if Friday’s report produces an upside surprise or as-expected job gains, investors could end up focusing instead on the prospect of softer employment growth in the months ahead. That is because February’s round of data will not reflect federal cutbacks, and the economy may be due for a slowdown anyway regardless of what the Trump administration does.
Tariff threats and slowing growth
President Donald Trump’s ongoing trade threats against other countries have only added further uncertainty to the U.S. outlook – producing big swings in stock, bond and currency markets.
The past week’s worth of data has included an updated estimate that revealed the U.S. economy grew at a 2.3% annual rate during the final three months of last year.
Before those months, the economy produced a GDP growth rate of more than 3% on a quarterly basis for most of the time between the third quarter of 2023 and the same period in 2024. This stretch was “an exceptionally long period of time for GDP to be growing above potential,” outside of time periods immediately following recessions, said Simons of Jefferies.
Via phone, Simons said his expectation for below-consensus job growth in February is based on a general cooling-off period that he expected to occur during the first six months of 2025.
At Philadelphia-based Glenmede, which oversees roughly $47 billion in assets, Michael Reynolds, vice president of investment strategy, said his firm expects February’s jobs data to reflect a labor market that continues to hold up.
If the unemployment rate ticks higher, however, market participants will reassess how healthy consumers will be over the rest of 2025, he said. And depending on the magnitude of any misses in the jobs report, market participants could immediately price in a growth scare as a higher-probability outcome, Reynolds said via phone.
Under that scenario, “there’s going to be more meaningful questions about whether this is a true growth scare” that stops short of a recession, he said – adding that “we would expect a meaningful correction in equities, but not a full-blown bear market.”
-Vivien Lou Chen
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