The latest jobs report reveals signs of softness in the labor market, with the economy adding one hundred fifty-one thousand jobs in February, a figure close to the average monthly gain of one hundred sixty-eight thousand over the past year. The unemployment rate has ticked up to four point one percent, still low but concerning due to nearly three hundred eighty thousand workers leaving the labor force and five hundred ninety thousand reporting they were no longer employed. Notably, the broadest measure of unemployment, which accounts for those wanting work but not actively seeking it, rose to eight percent, the highest level in three years.
Evidence suggests that businesses are becoming more hesitant to hire, with private sector employers adding only 77,000 jobs last month, a stark decline from the previous month’s gains. This slowdown is attributed to uncertainty surrounding tariffs and spending cuts, which are causing employers to reassess their hiring strategies. Meanwhile, the Institute for Supply Management’s monthly survey indicated an acceleration in the service sector, yet participant comments reflect a mixed outlook, citing chaos due to tariff actions and increased uncertainty post-election. However, small businesses, defined as those employing between one and nineteen workers, experienced a net decline of twelve thousand jobs. Regionally, the Northeast and Midwest saw employment gains of fifty-five thousand and fifty-six thousand, respectively, while the South and West reported declines.
The IT job market in the United States showed mixed signals in February, with unemployment rising for the second consecutive month to 3.3 percent, up from 2.9 percent in January, according to data from the Bureau of Labor Statistics. Despite an increase of nearly 490,000 job postings, tech employment shrank by over 9,000 positions. Janco Associates reported a higher unemployment rate of 5.4 percent, though this is down from 5.7 percent in January. Economic uncertainties, including stock market fluctuations and inflation concerns, contributed to hiring slowdowns, with tech demand decreasing by six percent so far this year. However, demand for skills in artificial intelligence continued to trend upward, with job listings mentioning AI skills rising by 116 percent compared to last year.
Freelancers are increasingly facing challenges due to the rise of artificial intelligence, according to a recent study by researchers at Washington University and New York University’s Stern School of Business. The study reveals that for every one percent increase in a freelancer’s past earnings, there is a half percent drop in job opportunities and a one point seven percent decrease in monthly income following the introduction of AI technologies. This trend is concerning as, by 2024, over seventy-six million Americans were identified as freelance workers, representing more than thirty-six percent of the workforce.
Why do we care?
The latest job data highlights a softening labor market, regional disparities in employment, and tech hiring stagnation. Small businesses (1-19 employees) shed 12,000 jobs, signaling that this segment is under economic stress. For MSPs targeting small businesses, this could translate to budget cuts, longer sales cycles, and lower IT spending.
And Regional Job Disparities Could Influence IT Spending. The Northeast and Midwest saw job growth (+55K and +56K, respectively). The South and West experienced declines. If you operate in a struggling region, expect slower growth and possible pricing pressures. If you’re in a growing area, position IT services as an enabler of business expansion And, consider geographic diversification—MSPs with clients across multiple regions will be less vulnerable to localized downturns.