CNN
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The US economy kicked off 2025 by adding 143,000 jobs in January, fewer than expected; but the unemployment rate dipped to 4%, according to data released Friday by the Bureau of Labor Statistics.
Economists were projecting the unemployment rate would stay at 4.1% and 170,000 jobs would be added, according to FactSet estimates.
Friday’s report — which also featured some significant data adjustments that happen at the start of every year — also provided more clarity on recent labor market trends, indicating that job growth last year was weaker than previously estimated.
The latest benchmark revision — an annual process that squares up estimates — showed there were 589,000 fewer jobs added to the economy in 2024 (more on that below).
Accounting for the revisions, there were just shy of 2 million jobs added last year, amounting to roughly 166,000 jobs per month — a pace practically equal to the 165,000 average monthly gains seen in 2019.
“The foundation of the labor market remains incredibly sturdy,” Cory Stahle, an economist at the Indeed Hiring Lab, wrote in a statement on Friday. “Revisions to the past year’s data may have rearranged a few rooms in the house, but they did not fundamentally change the structure.”
In the years following the economy-upheaving pandemic, the labor market has slowed, but it has not collapsed. Growth has remained solid enough to fuel consumer spending and put the economy on track for a “soft landing” of reining in inflation without triggering a recession.
It’s also been historic. Through January, the US economy has posted monthly job gains for 49 months, marking the second-longest period of employment expansion on record, according to BLS data that goes back to 1939. (The longest was a 113-month streak from October 2010 to February 2020).
The effects of wildfires and weather
In January, health care and social assistance continued to lead the way, accounting for nearly half of the month’s gains by posting net job growth of 66,000. The retail sector and government (which spans federal, state and local hiring) recorded employment growth of 34,300 and 32,000 respectively.
Most major industries added jobs, although some of the gains were quite modest.
Cold and severe weather, illnesses as well as the wildfires in Los Angeles likely weighed on the month’s job growth, Diane Swonk, chief economist at KPMG, told CNN in an interview.
She noted shifts in key underlying data points: a loss in leisure and hospitality jobs; increases in people who missed work due to illness or weather; and a decrease in the participation rate of prime working age women.
“We tend to see that during disaster, because women with small children no longer have help,” she said.
BLS officials did include a notation about the wildfires and weather in Friday’s report, but noted that there was “no discernible effect.”
Economists tell CNN that’s likely just “BLS-speak” for conducting with little interruption the two surveys that compose the jobs report: one of establishments and the other of households.
“We do think there was probably about a 15,000 jobs reduction in this report that we could probably attribute to the wildfire situation,” Josh Hirt, senior US economist at Vanguard, told CNN.
When stripping out some of the weather- and disaster-related noise of January and recent months, the labor market remains “very healthy” and on solid footing, Hirt said.
November’s and December’s job gains were revised higher by a combined 100,000 jobs, highlighting a rebound from a hurricane- and strike-depressed October.
“There’s generally going to be some typical volatility that we see with monthly payroll numbers in general,” he said. “If you take a look at the last four months, I think you get a pretty clean picture of what’s happening in the labor market. The reality there is we’re averaging just under 200,000 jobs.”
Wage growth remained strong last month, rising 0.5% from December and running at a 4.1% annual rate. The strong monthly gain could reflect a “resetting of wages” that typically take place in January, Hirt said.
The pace of job growth has slowed during the past year. That’s been expected: The blockbuster pandemic recovery couldn’t continue forever; plus, the Federal Reserve’s inflation-busting high interest rates were designed to curb demand.
But in recent months, there has been a concerning trend: The churn that’s needed for a healthy labor market has slowed significantly. Businesses aren’t hiring as much, folks aren’t eager to quit, and those without jobs are staying on the sidelines for longer.
“That leaves us in a situation where things can essentially flip quite quickly, because you’ve already got companies hiring as if they’re in a recession — even if they’re not laying people off,” Oliver Allen, senior US economist at Pantheon Macroeconomics, told CNN this week.
And the potential for a significant change has dramatically increased as President Donald Trump has started implementing sweeping policy changes related to trade, immigration, federal employment reductions, as well as a crackdown on diversity, equity and inclusion efforts, Michelle Holder, associate professor of economics at John Jay College at the City University of New York.
These policies could very well reverse some of the historic employment gains made by women, Black workers, Latino workers and other underrepresented Americans, she said.
“Tariffs raise prices on goods and services, and when that occurs, people will buy less, and they will spend less,” she said. “The data, the trends are pretty crystal clear during economic downturns, during periods when [spending] declines, spending decreases in sectors where Black and Brown people are well represented.”
The culling of the federal workforce would disproportionately affect Black workers, she said, noting they are employed at greater rates in government positions than they are in the private sector.
“Those groups that were able to participate in the growth in the economy after we were brought back from the brink after the pandemic, I think those times are over,” she said. “I don’t think that the pictures for those groups get rosier.”
One important thing to keep in mind is that January jobs reports can be complex because of long-established data adjustments to take into account more current and comprehensive information.
First, are the seasonal adjustment factors. Every January, a substantial number of workers lose their jobs as the holiday season wraps up and as businesses do some start-of-year belt-tightening.
The statistical refinements help smooth out the data to better understand underlying trends. These adjustments anticipate a certain number of job losses to start the year, so if fewer workers get let go than anticipated, that can result in bigger overall employment gains (and vice versa).
Second, is the annual benchmark revision to past payroll data.
This process, which has taken place for two decades running now, involves reconciling the initial employment estimates conducted via a series of robust surveys of businesses with the hard (but lagging) data from unemployment insurance tax filings required for most businesses.
The preliminary benchmark estimate, released in August, indicated a potential revision of minus 818,000 jobs from April 2023 to March 2024. That was expected to be the biggest revision since 2009.
These large swings happen in significant economic transitions (the Great Recession then and the pandemic now). In addition to pandemic-era economic shifts that knocked tried-and-true models a little out of whack, the recent surge in immigration likely played a role, economists have said.
The monthly establishment survey asks businesses how many workers they employ whereas the unemployment insurance forms require names and social security numbers.
“There’s nothing surprising about this [revision] data when you look at it in that light,” Ron Hetrick, senior labor economist at Lightcast, told CNN in an interview last month.
On Friday, the final benchmark revision came in at 589,000, a narrowing economists expected because of data seen in the recent Quarterly Census of Employment and Wages reports (which are based upon the quarterly UI tax filings).
Third, is the inclusion of new population estimates from the Census (another annual occurrence). These adjustments are included in the household side of the employment report, which looks at labor force characteristics and where key ratios such as the unemployment rate are generated.
