"Alarming" Deterioration in U.S. Jobs Market

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One economist says the incoming survey data is "alarming."

Surveys of the U.S. labour market point to a noticeable deterioration in the employment situation, which should soon be reflected in official data.

"Lading indicators are alarming," says Samuel Tombs, Chief U.S. Economist at Pantheon Macroeconomics, who looks for jobless claims to start rising in the coming weeks.

His warning follows the release of another flat weekly jobless claims docket (initial claims fell to 220K from 222 K, and continuing claims fell to 1,870K from 1,897K).

"The very low trend in claims is unlikely to last much longer," Tombs warns, citing evidence of rising job losses in the survey numbers.

In February 2025, U.S. employers announced 172,017 job cuts, marking a 245% increase from January's 49,795 layoffs and the highest monthly total since July 2020.

This is according to the latest U.S. Challenger Layoff Data, which attributed the surge to reductions in the federal workforce, with 62,242 job cuts across 17 agencies.

Challenger says the pickup is linked to the actions taken by the Department of Government Efficiency (DOGE).

Source: Challenger, Gray & Christmas, Inc.

The retail and technology sectors also experienced notable layoffs during this period. ​

"We think there are some downside risks on the horizon for the labor market due to DOGE-related layoffs," says Shruti Mishra, U.S. Economist at Bank of America. "Our takeaway is that government sector has started to see the impact of DOGE, but the private sector hasn’t reflected a substantial spillover effect yet."

The Worker Adjustment and Retraining Notification (WARN) Act mandates that employers provide advance notice of significant layoffs.

Here, recent data indicates a substantial increase in layoff notices, particularly within federal agencies affected by DOGE initiatives.

This trend underscores the broader impact of government restructuring on employment across various sectors. ​

As of late February 2025, U.S. job openings stood at approximately 7.7 million, according to job site Indeed, reflecting a slight increase from 7.5 million in January.

Despite this uptick, the number of available jobs has steadily declined over the past two years, decreasing by over one-third from a record 12.1 million in 2022.

This decline suggests a softening labor market, with companies slowing hiring amid economic uncertainty. ​

"A rising proportion of people that are laid off will struggle to find new work quickly," says Tombs.