The Department of Government Efficiency’s 10,000 public sector job cuts lowered employment additions in February. But overall job additions remained range-bound, temporarily stabilizing the mortgage rate outlook.
The U.S. added 151,000 jobs to payrolls during the month compared to a Bloomberg estimate for 160,000, and unemployment rose to 4.1 from 4% in January. Nonbank mortgage industry estimates reported with a one-month lag to U.S. jobs fell to 264,200 from a revised 266,200.
“Overall, the data was close to forecast but did give slight concern,” said Cody Echols, capital markets trading advisor at MCT in commentary published Friday. “Mortgage rates will likely print flat to slightly better this morning, all else constant.”
Whether the combination of government cuts and tariffs will compel officials to lower rates or not has been a complicated question, according to Melissa Cohn, regional vice president at William Raveis Mortgage. Policy could improve the economy but has weakened it in the short run.
“We know that they’re going to be heavily pressured to cut rates. We know that they don’t pay attention to that pressure,” she said in an email, in which she also noted that signs of economic weakness “may force their hand.”
Her comments allude to the fact that the Federal Open Market Committee sets monetary policy only based on economic conditions but previously was under some pressure from President Trump to lower short-term rates. His team has since indicated more interest in lowering long rates.
With the private sector adding 140,000 positions and consistent 4% wage growth, Mortgage Bankers Association Chief Economist Mike Fratantoni said in a note the numbers were “close to market expectations and hence should not result in much change concerning Fed policy.”
Fratantoni is anticipating that “the Fed will keep their target rate steady through the next quarter but will likely cut one more time this year as inflation moves slowly to target and the job market softens.”
Pending DOGE cuts will weigh on the market, he said. DOGE is a vehicle President Trump is using to cut what his team considers nonessential government positions.
The majority of job losses last month came from DOGE, according to a report outplacement firm Challenger, Gray & Christmas Inc. issued Thursday.
Challenger, Gray & Christmas reported there were 172,017 job cuts in February, up 103% from the same month in 2024 and 245% from January 2025. Cuts were last that high amid the pandemic in July 2020, when there were 262,649.
While DOGE cuts dominated job losses there also were some private sector declines in areas such as retail and technology, according to the outplacement firm. Some of the layoffs stemmed from parts of the market affected by the loss of public funding such as nonprofits.
Ripple effects of the DOGE cuts are likely to continue regardless of whether court challenges continue to constrain them, according to Andrew Challenger, a senior vice president at the outplacement firm.
“When mass layoffs occur, it often leaves remaining staff feeling uneasy and uncertain. The likelihood that many more workers leave voluntarily is high,” he said in the company’s report.
Employment and inflation measures have been the Fed’s go-to reference points for monetary policy, and tariffs Trump seeks to impose globally have been a wild card when it comes to views of the latter.
“The word tariff was mentioned 49 times in the recent Beige Book survey and created a lot of inflationary uncertainty for the Fed,” noted money manager Louis Navellier in recent market commentary. His view is tariffs won’t be inflationary but there are mixed opinions on this.
This week tariffs roiled the market but later recovered after a temporary reprieve delayed the arrival of some of them.
