The beginning of 2025 in the US saw an addition of 143,000 jobs in January, which was lower than anticipated. However, the unemployment rate fell to 4%, as per the data released on Friday by the Bureau of Labor Statistics. Economists had predicted a steady 4.1% unemployment rate with an addition of 170,000 jobs, based on FactSet estimates. The recent report, accompanied by significant data adjustments customary at the start of each year, shed light on recent labor market trends, revealing weaker job growth in the previous year than previously thought. The latest annual benchmark revision reconciled estimates, showing 589,000 fewer jobs were added to the economy in 2024.
Taking the revisions into account, nearly 2 million jobs were added last year, averaging around 166,000 jobs per month, a pace almost identical to the 165,000 average monthly gains of 2019. Economist Cory Stahle from the Indeed Hiring Lab emphasized the robustness of the labor market, mentioning that while the data revisions might have reshuffled a few details, they did not alter the fundamental structure.
In the aftermath of the disruptive pandemic, the labor market has slowed down, yet it remains resilient. The growth has been substantial enough to sustain consumer spending and steer the economy towards a controlled reduction in inflation without triggering a recession, setting the stage for a gradual adjustment. The US economy has now seen job gains for 49 consecutive months up to January, marking the second-longest employment expansion period on record since 1939 (the longest being a 113-month streak from October 2010 to February 2020).
Effects of natural disasters and weather conditions were evident in January. Health care and social assistance led the job growth, while retail and government sectors also contributed positively. Despite overall job gains across major industries, some increases were marginal. Economist Diane Swonk from KPMG pointed out the impact of cold weather, illnesses, and wildfires in Los Angeles on the job market. She highlighted shifts in important data points, such as reduced leisure and hospitality jobs and changes in the participation rate of working-age women.
While the Bureau of Labor Statistics acknowledged the wildfires and weather in their report, they indicated no significant impact. Economists suggested that this might be due to the uninterrupted conduct of the surveys that compose the jobs report. However, they estimated a possible 15,000 job reduction in the report attributed to the wildfire situation.
Amidst the noise of weather-related disruptions, the labor market was seen as stable and robust. Economists noted that despite the challenges faced in January and recent months, the labor market remains in good health.
In January, the labor market added a combined 100,000 jobs, signaling a recovery from a downturn in October due to a hurricane and strike. “There’s typically some volatility in monthly payroll numbers,” stated an expert. Looking at the last four months offers a clearer view, with an average of just under 200,000 jobs created. Wage growth remained robust, increasing by 0.5% from December and running at a 4.1% annual rate, possibly due to a resetting of wages typical for January.
While the labor market is currently strong, the pace of job growth has slowed over the past year, as expected after the rapid pandemic recovery. However, recent trends show a worrisome decline in job turnover, with businesses hiring less, employees less willing to leave, and unemployed individuals staying out of the workforce longer.
Experts warn of potential rapid shifts, particularly as President Trump enacts significant policy changes affecting trade, immigration, federal employment, and diversity initiatives. These policies could reverse employment gains for women, Black, Latino, and other underrepresented groups, impacting spending patterns and job opportunities. The reduction in federal workforce could disproportionately affect Black employees, who are more likely to work in government roles.
January job reports are intricate due to data adjustments made to reflect current information accurately. Seasonal adjustments account for job losses post-holiday season, while annual benchmark revisions refine past payroll data.
The ongoing process, which has been happening for two decades now, involves reconciling initial employment estimates obtained through robust surveys of businesses with the lagging data from unemployment insurance tax filings, which are mandatory for most businesses. The preliminary benchmark estimate, released in August, suggested a potential revision of minus 818,000 jobs from April 2023 to March 2024, expected to be the most significant revision since 2009.
These substantial fluctuations occur during significant economic transitions, such as the Great Recession in the past and the current pandemic. Alongside the economic shifts caused by the pandemic disrupting traditional models, economists have suggested that the recent surge in immigration has also played a role. The monthly establishment survey inquires about the number of employees at businesses, while the unemployment insurance forms require specific data like names and social security numbers.
Ron Hetrick, a senior labor economist at Lightcast, noted, “There’s nothing surprising about this [revision] data when you look at it in that light,” in an interview with CNN last month. On Friday, the final benchmark revision was reported as 589,000, a narrower figure than expected due to data from the recent Quarterly Census of Employment and Wages reports, which rely on quarterly UI tax filings.
Moreover, new population estimates from the Census, an annual event, are also factored into the equation. These adjustments are incorporated into the household section of the employment report, which examines labor force characteristics and generates key ratios such as the unemployment rate. To access more CNN news and newsletters, you can create an account at CNN.com.
