The U.S. labor market is projected to remain stable in February, with job growth likely picking up and the unemployment rate holding at around 4.0%, despite growing concerns over trade policy uncertainty and deep federal spending cuts, according to economists.

The Labor Department’s closely watched employment report, set for release on Friday—the first under President Donald Trump’s administration—is anticipated to show an increase of about 160,000 nonfarm payroll jobs, compared with 143,000 in January. However, the report comes at a time when businesses are facing an unpredictable environment due to Trump’s fluid trade policies and significant federal budget uncertainties.

“Uncertainty, whether it’s in regulation or supply chain, is something employers hate most,” said Jane Oates, a senior policy advisor at WorkingNation. “It’s a really bad business atmosphere, and we could be headed for an ugly spring.”

The anticipated labor market gains may be partially offset by potential declines in federal employment. Michael Pugliese, a senior economist at Wells Fargo, noted that a hiring and funding freeze in the federal government could lead to a small decline in federal jobs—possibly between 5,000 and 10,000 positions—as the recent layoffs by the Department of Government Efficiency have mostly occurred outside the survey week.

Rising average hourly earnings are expected to continue, with forecasts indicating a 0.3% increase in February following a 0.5% surge in January, and annual wage growth holding steady at 4.1%. Nevertheless, these positive indicators come amid broader economic concerns. A drop in consumer spending and homebuilding, along with a surge in the trade deficit linked to new tariffs, have led some economists to downgrade GDP growth estimates to below 1.5% on an annualized basis, while the Atlanta Federal Reserve forecasts a contraction at a 2.4% rate.

“The economy has shown itself to be surprisingly resilient during the pandemic recovery cycle, which is encouraging,” said Brian Bethune, an economics professor at Boston College. “But there are a lot of shocks now surging over businesses, including budget uncertainties and proposed tariffs on the scale that we have not seen since Smoot-Hawley in 1930.”

With the Federal Reserve maintaining its overnight interest rate in the 4.25%-4.50% range—after cutting it by 100 basis points since September—the upcoming employment report will provide critical insight into the labor market’s ability to withstand the ongoing turbulence in trade policy and federal spending.

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