February Jobs: A Weak Start to 2026 Gets Weaker

• ADP data showed businesses added just 63,000 jobs in February.

• That’s below the historical average of 160,000 for the month.

• These numbers point to monetary policy that’s still too tight.

The jobs engine didn’t stall in February, it just kept grinding lower…

Earlier this week, I laid out how I see the labor market setting up. I walked through the forward‑looking signals I track to gauge what today’s payroll report might reveal. All of them pointed in the same direction: February showed little evidence of meaningful improvement…

That’s why I expect the U.S. Bureau of Labor Statistics (“BLS”) update to echo that theme. Even if the headline comes in near Wall Street’s 58,000‑job forecast, that’s still nowhere close to the typical February gain of 295,000 since 2015. And with January already running below trend, another soft print would confirm the labor market is starting the year on shaky footing.

February is usually the strongest month for job seekers. But this week’s ADP release reinforced the slowdown I’ve been flagging. Hiring ran at roughly one‑third of its usual pace, and January’s already‑weak figure was cut in half after revisions. If the BLS data lands where I expect, it strengthens the case for additional rate cuts later this year and supports the ongoing rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data’s telling us…

Each month, ADP’s payroll report offers an early read on private‑sector hiring. It uses real‑time payroll data from millions of workers across its client base. It’s not a perfect mirror of the BLS report, but it often captures turning points in hiring momentum before the official numbers do. Markets watch it closely because big surprises, up or down, tend to reset expectations for the upcoming Nonfarm Payrolls release. At its core, ADP is a forward‑leaning signal of how businesses are actually staffing in real time.

This week, ADP released its monthly hiring data for February. According to its estimates, companies brought on just 63,000 new workers last month. That was above Wall Street’s estimate for a gain of 50,000 and follows on the heels of a downwardly revised 11,000 jobs added in January.

That confirms 2026 is already off to a bad start. The average monthly increase of 37,00 jobs so far in 2026 is in-line with the typical 33,000 number in 2025. That was the weakest annual pace, outside of COVID, based on data going back to 2010. More importantly, last month’s number was much weaker than the typical January gain of 160,000…

These signals matter because they shape how the Federal Reserve responds. The numbers are telling policymakers the labor market remains fragile. The Fed has said it wants to give recent rate cuts time to filter through the economy, usually a six‑ to eight‑month window.

But the central bank can’t ignore a deteriorating labor backdrop. Waiting too long risks forcing more aggressive action later. Moving earlier requires less easing overall.

One way to gauge how much room the Fed has to support growth is by looking at the real rate of interest (effective federal funds rate minus inflation). A positive real rate means policy is restraining price growth; a negative rate means it’s fueling it. Based on the latest Consumer Price Index (“CPI”) data, the Fed has ample room to ease.…

In January, the effective federal funds rate was roughly 3.6% while inflation was running at 2.4%. Subtracting the two gives the Fed about 120 basis points of room before hitting the so‑called neutral level, where policy is neither restrictive nor stimulative. And given the Fed has managed the real rate to an average of -0.6% since 2000, the total cushion is closer to 180 bps.

Bottom line: if today’s BLS report lines up with the trends already in motion, Wall Street will likely grow more confident in expecting two additional rate cuts by year‑end. And with plenty of room to ease further, lower rates through 2027 should help reduce borrowing costs, free up cash flow, and support economic growth—fueling a steady, durable rally in the S&P 500.

Five Stories Moving the Market:

The Trump administration is weighing a range of options for addressing the spike in oil and gasoline prices amid the war in Iran, according to Interior Secretary Doug Burgum; he said the list includes possible actions that would have immediate impact as well as longer-term and more complex options – Bloomberg. (Why you should care – Wall Street is more interested in a long-term solution involving the reopening of Strait of Hormuz)

China is in talks with Iran to allow crude oil and Qatari liquefied natural gas vessels safe passage through the Strait of Hormuz ​as the U.S.-Israeli war on Tehran intensifies; China, which has friendly ​relations with Iran and relies heavily on Middle Eastern supplies, is unhappy about the ​Islamic Republic's move to paralyze shipping through the Strait – Reuters. (Why you should care – reopening the Strait of Hormuz would cause oil prices to drop, easing concerns about rebounding inflation growth)

Treasury Secretary Scott Bessent is considering asking China to buy less oil from Russia and more from the U.S.; Bessent is scheduled to meet with Chinese Vice Premier He Lifeng in mid-March, ahead of a summit between Presidents Donald Trump and Xi Jinping at the end of the month – WSJ. (Why you should care – oil purchases from the U.S. would help to close the trade gap between the two nations)

U.S. officials are debating a ​new regulatory framework for exporting artificial intelligence chips and are considering requiring foreign nations to invest in U.S. AI data centers or security guarantees ‌as a condition for granting exports of 200,000 chips or more – Reuters. (Why you should care – this would go against the recent narrative that the White House was considering a cap of 75,000 chips per company)

Iranian Foreign Minister Abbas Araghchi said his country is “not asking for a ceasefire” from the United States and Israel, “and we don’t see any reason why we should negotiate” after nearly a week of war; he said Iran is “confident” that it can confront the U.S. military if President Donald Trump decides to invade the nation with ground troops – CNBC. (Why you should care – Araghchi’s comments indicate the current government is intent on remaining in power)

Economic Calendar:

Earnings – DDD, GCO, ICLR, TEN

Eurozone – German Factory Orders for January (2 a.m.)

ECB’s Lagarde (President) Speaks (5 a.m.)

Eurozone – GDP for Q4 (5 a.m.)

U.S. – Average Hourly Earnings for February (8:30 a.m.)

U.S. – Nonfarm, Manufacturing, Private Payrolls for February (8:30 a.m.)

U.S. – Unemployment Rate for February (8:30 a.m.)

U.S. – Business Inventories for December (10 a.m.)

U.S. – Retail, Wholesale Inventories for January (10 a.m.)

ECB’s Schnabel (Board Member) Speaks (12 p.m.)

U.S. - Baker Hughes Rig Count (1 p.m.)

U.S. – Consumer Credit for January (3 p.m.)

U.S. - CFTC’s Commitment of Traders Report (3:30 p.m.)

Fed Releases Balance Sheet Updates on Commercial Banks (4:15 p.m.)