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Some economists may view the January jobs report as a bit of a soft report. But when you put it in the context of the last 20 years, it is pretty close to the pre-COVID era, when there was a fairly stable economy, said Greg Brown, a research fellow at the Kenan Institute of Private Enterprise.
“You can find good things, you can find bad things, but for the most part it is right in line with what would be consistent with an economy that continues to expand at a trend rate for the U.S.,” Brown said, in a video call.
Job growth rose by 143,000 in January, a sharp drop from the upwardly revised 307,000 in December and 261,000 in November.
Brian Bethune, an economist at Boston College, believes this is the first bit in a possible string of bad news for the U.S. economy.
“The sharp drop in employment gains in January is likely to be the first shoe to drop on radical policy-induced change in the trajectory of the economy,” Bethune said in an email.
Uncertainty in the policy environment since November has already had a depressing effect on business investment, Bethune noted.
“It would be ridiculous to jump to the conclusion that flip-flopping on tariffs with the largest trading partners, and [on] continental energy policies, and deporting hundreds of thousands of low-wage workers, is neutral for the economy,” Bethune said.
Federal Reserve officials have been saying for a few months that the labor market is not adding to inflation pressures.
This continued after the big gain in wages seen in the February jobs data. The 0.48% gain in average hourly earnings in February was the biggest since June 2023.
In an interview with Yahoo Finance after the report was released, Chicago Fed President Austan Goolsbee said “wage growth is about consistent with 2% inflation.”
Economists aren’t so sure.
“A three-month trend of the unemployment rate falling and accelerating year-over-year wage growth isn’t going to get us to the Fed’s 2% inflation target,” Sean Snaith, an economist at the University of Central Florida, said in an email message.
Employment among native-born Americans actually increased in 2024, instead of declining as the old government statistics seemed to show.
From January 2024 to January 2025, employment among the native born rose by 766,000, updated statistics show.
Why did government data previously show employment among the native born declining?
As for foreign-born workers, their employment rose by 1.9 million from January 2024 to 2025. Many of them found work at hotels, restaurants, hospital support staff, social work, construction and the like.
The explosion in immigrants during the Biden administration has added about 3 million people to population of working-age adults.
The Bureau of Labor Statistics updated its estimate of the civilian non-institutional population to 272.9 million from a previous 269.6 million. These are adults adults not in prison, nursing homes or the military.
The huge surge in immigration, legal or illegal, in 2022 and 2023 caught government statisticians by surprise. Now they appeared to have caught up, using new information to update their estimate.
The increase in the population, however, didn’t really change perceptions of the U.S. labor market.
The unemployment rate fell slightly to 4.0% from 4.1% and hiring was strong toward the end of last year, as previously reported.
What did winter storms do to the employment picture? Motorists are shown here driving in snow near the I-20 and I-95 exchange on Jan. 22 in Florence, S.C. (Getty Images)
The jobs report for January was soft “at least partly because of bad weather,” said Chris Low, chief economist at FHN Financial, in a note.
“In January, 573k people were unable to work due to bad weather, according to the BLS, the most since the Texas ice storm four years ago,” Low wrote. He also offered this prediction: “Yields should recover once traders realize it was caused by bad weather.”
When the labor market is on fire, workers tend to, well, work more. Businesses hire more people to keep up with demand, ask them to work more hours or increase overtime.
Yet the average workweek in January actually fell to the lowest level since March 2020, when the pandemic shut down large parts of the U.S. economy.
Hours worked by the average worker slid to 34.1 last month from 34.2 in December and a peak of 34.4 in March.
What’s going on? Wildfires in California prevented many people from working, for one thing. And a major cold snap in much of the U.S. kept people indoors.
The result: restaurants, hotels and other companies in leisure and hospitality cut worker hours or sent people home.
Some 573,000 people told the government they could not get to work last month. That’s the highest level in almost four years.
The typical workweek for U.S employees is 34.4 to 34.6 hours during economic expansions.
Economist Kevin Hassett, an adviser to President Donald Trump, is shown speaking in 2018 as Trump looks on. (nicholas kamm/Agence France-Presse/Getty Images)
Kevin Hassett, director of President Donald Trump’s National Economic Council, has criticized the Biden administration in discussing downward revisions in the U.S. employment data.
“What we learned with all these downward revisions is that the Biden economy — the Biden jobs market — was way worse than markets thought,” Hassett said in a Bloomberg TV interview this morning. “That’s sort of consistent with the rest of our views — that their policies were unwise, and there’s a lot of cleaning up to do.”
(Bureau of Labor Statistics)
A forensic examination of the U.S. labor market pretty much tells us what we knew along: Hiring was go, slow, and go again.
Hiring was fairly robust at the start of 2024. It tailed off sharply in the middle of the year due to high interest rates. And job creation re-accelerated by year end as the Federal Reserve cut interest rates.
The above graphic shows the old and newly updated employment figures for each month of 2024.
We knew from prior government reports that hiring was much softer from April 2023 to March 2024.
What we didn’t know for sure is what happened from April to December. Not much, when we look at the big picture.
The economy added 159,000 jobs a month during that nine-month stretch under the old assumptions. The updated average gain over that period now is 155,000.
The average wage earned by an American worker rose a sharp 0.5% in January, more than twice the typical increase. How come? Most likely because higher minimum wages kicked in in a number of states.
Hourly wages have risen 4.1% in the past year and could pose a problem for the Federal Reserve as it fights to lower inflation to its 2% target.
Fed Chairman Jerome Powell has repeatedly said labor costs have not been a big factor in inflation, but wages are running well above the normal increase of 2% to 3% a year.
Eventually these costs could start to add to inflation, economists caution.
