Strike derails healthcare gains

March 6, 2026

Payroll employment dropped by 92,000 in February after a modest downward revision to 126,000 payroll gains last month. The three-month moving average on job gains fell to 6,000 in February from 50,000 in January. The economy shed jobs in the fourth quarter of 2025 when more than 150,000 federal workers rolled off the payrolls on October 1. 

Public sector payrolls shed 6,000 jobs. Losses were concentrated at the federal level, driven by losses outside of the postal system. Poor morale and retirements are taking a toll on federal payrolls. The lapse in funding for the Department of Homeland Security is much smaller than the six-week full government shutdown last fall. Federal workers are paid in arrears after the funding stops, which means that they are still counted as part of payrolls.

Private sector payrolls fell 86,000. Healthcare and social assistance, the driver of most recent job creation, tumbled 18,600. That is the first time that sector failed to create jobs since January 2022. A major strike across California and Hawaii, which shaved 27,000 jobs from the total, more than accounted for that loss. 

Financial services added 10,000 jobs. That was more than offset by losses elsewhere in the economy. The labor market remains a one-legged stool, so much so that when the one sector supporting it suffers a loss, the total slips into the red. 

Leisure and hospitality shed jobs for the second consecutive month. Accommodation and food services lost 35,000 jobs. Some of that could reflect a loss in immigration. The sector is among the most dependent on immigrant labor; quit rates have jumped since last summer. It is the only sector showing a rise in quits.   

Professional business services continued to shed jobs. A slight increase in temporary hiring was more than offset by full-time hires. 

Information continued to shed jobs. The bulk of the losses were in the motion picture and sound recording industry, which is struggling. The tech sector lost more jobs. Both are exposed to innovations in AI. 

The tech sector has been losing jobs since 2023, after the first large language model was introduced in late 2022. A combination of productivity gains in coding with the new models and a need to boost cash flow to support construction of data centers are behind those losses.  

Construction employment fell by 11,000 due to a loss in specialty residential. Unusually harsh winter weather and elevated construction costs took a toll on new home construction at the start of the year. Builder sentiment lost ground again at the start of year, despite a drop in interest rates. A rise in the stock of unsold new homes is another hurdle. Migration to what were the hottest post-pandemic markets has cooled, while construction where pent-up demand is greatest is limited. 

Manufacturing shed 12,000 jobs and is down 98,000 jobs over the last 12 months. Manufacturing is moving into its fourth consecutive year of losses. The only sector to show gains was fabricated metals, which includes the steel sector. The gains were small and the sector has shed jobs for two straight years, despite protection from tariffs.

Transportation and warehousing fell by 11,300, with 16,600 coming from couriers and messengers. Trucking continued to shed jobs as well. Consolidation in the trucking sector has lowered the supply of trucks below demand. That is pushing up freight rates at a time when higher diesel prices will add even more to those costs. 

Average hourly earnings jumped 0.4% and rose 3.8% from a year ago. That is a tick higher than we saw in January. Wages tend to be sticky and have cooled only modestly over the last year. Indeed postings show a sharp slowdown in new wages. Advertised wage gains have cooled to a 2% rate, which is less than we saw pre-pandemic.  

The cooling of wages has been slow and remains extremely uneven. The largest weakness is in manufacturing and mining, while wages are accelerating in trade, transportation and utilities. The surge in utilities is stunning and reflects the stress that data centers are adding to the energy grid.

Separately, the unemployment rate edged up to 4.4%, despite a drop in participation. We saw an increase in layoffs. Two-thirds of those losses were concentrated in temporary jobs. Some of that could reflect unusually bad winter weather, notably in the South. Another portion is likely due to collateral damage from the strike in the healthcare sector.

The loss in participation in the labor market was driven by a drop in prime-age workers, those 25-55 years old. Young job seekers increased their participation during the month along with those over 65 years old. Men dominated the older age group.

The duration of unemployment rose during the month. The ranks of the long-term unemployed – those unemployed for more than 27 weeks – rose during the month.  

The only good news in the employment report was the U6 measure of unemployment, which dropped from 8.1% to 7.9%. The ranks of those having to accept part- instead of full-time work fell.