Flash Report: Unemployment Flows Point to Modestly Softer Labor Market Conditions in February

March 07, 2025

KEY TAKEAWAYS

The U.S. unemployment rate rose from 4.0% in January to 4.1% in February, returning to its December level and suggesting a modest softening in labor market conditions. (See the Bureau of Labor Statistics’ Employment Situation release data in FRED.)
The unemployment rate increase was driven primarily by a higher number of people losing or leaving their jobs and becoming unemployed (job separations) and a slight decrease in the number of unemployed people finding jobs.
Despite February’s modest uptick in the unemployment rate, indicators suggest overall employment conditions in the U.S. remain historically robust.

This analysis focuses on how potential flows into and out of unemployment during February affected the overall unemployment rate.

Breaking the change in the unemployment rate into key components can offer a better sense of labor market conditions. (For information on this method, see Maximiliano Dvorkin and Serdar Ozkan’s St. Louis Fed On the Economy blog post “The Recent Ins and Outs of Unemployment: Using Flows to Study Labor Market Dynamics.”)

While the unemployment rate ticked up to 4.1% in February, this rate is within the narrow range observed since May 2024.
The modest increase in the unemployment rate was driven primarily by a substantial rise in job separations and a slight decline in the number of unemployed people finding jobs. (See the table below.)
Employment as a share of the civilian working-age population (employment-to-population ratio) declined 25 basis points in February, driven by a simultaneous decline in labor force participation. This was larger than the 13 basis point increase in the unemployment rate.

Breaking Down the Monthly Change in the Unemployment Rate
		February 2025	Last 3 Months	Last 12 Months
Average Monthly Change in Unemployment Rate (Percentage Points)		+0.13	-0.03	+0.02
Contribution of Job Flow Components to Average Monthly Change in Unemployment Rate (Percentage Points)	People Losing or Leaving Their Jobs and Becoming Unemployed	+1.00	+0.91	+0.95
	Unemployed People Finding Jobs	-1.02	-1.07	-1.05
	People Previously Not in the Labor Force Who Are Now Seeking Work	+1.05	+1.05	+1.05
	Unemployed Workers Leaving the Labor Force (e.g., Discouraged Workers)	-0.90	-0.92	-0.92
SOURCES: Bureau of Labor Statistics and Research staff’s calculations.
NOTES: Data are seasonally adjusted. The overall change is based on the precise unemployment rate for these periods; for example, the unemployment rates were 4.1395% in February and 4.0113% in January. The flow components into and out of unemployment add up to the change in unemployment with a negligible residual. Again, see see Maximiliano Dvorkin and Serdar Ozkan’s St. Louis Fed On the Economy blog post “The Recent Ins and Outs of Unemployment: Using Flows to Study Labor Market Dynamics.”