U.S. employers have increased Surprisingly strong 130,000 jobs were lost last month, but the administration’s revisions cut U.S. employment by hundreds of thousands in 2024-2025.
The Labor Department said Wednesday that the unemployment rate fell to 4.3%.
The report was significantly revised, reducing the number of jobs created last year to just 181,000, one-third of the 584,000 jobs previously reported and the lowest since the 2020 pandemic.
Although the economy is growing steadily, the job market has been sluggish for months.
But January’s numbers were much stronger than 75,000 economists expected. Nearly 82,000 of the new jobs created last month were in the health care industry, accounting for more than 60%. The factory added 5,000 jobs, ending a 13-month streak of job losses. The federal government is cutting 34,000 jobs.
Average hourly earnings rose steadily 0.4% from December to January.
The unemployment rate fell from 4.4% in December as U.S. employment increased and unemployment fell.
“Job growth was surprisingly strong in January, driven largely by health care and social assistance,” Heather Long, chief economist at Navy Federal Credit Union, wrote in a commentary. “But it was enough to stabilize the job market and bring the unemployment rate down slightly…but it is stabilizing. That’s an encouraging sign to start the new year, especially after the job recession in 2025.”
The weakness in hiring over the past year reflects the lingering impact of higher interest rates set by the Federal Reserve in 2022 and 2023 to combat soaring inflation and the policies of Elon Musk. Clear Final year in the federal workforce. The chaos of President Donald Trump Unstable trade policy It also makes companies less willing to recruit.
The lackluster data comes ahead of Wednesday’s report. Employer just posted 6.5 million job openings In December, it was the lowest in more than five years.
Payroll processor ADP reported last week that private employers added a surprisingly weak 22,000 jobs in January. Employment consulting firm Challenger, Gray & Christmas reported that companies cut more than 108,000 jobs last month, the largest number of layoffs since October and the worst January layoffs since 2009.
Nicole Bachaud, labor economist at ZipRecruiter, said Wednesday’s new data could signal “the beginning of a labor market recovery.”
She noted that hiring got a boost as the Federal Reserve cut interest rates three times last year. Trump’s tariffs have proven to be smaller and more predictable than last spring’s, giving employers more confidence to hire workers. Bashaw also pointed out that the black unemployment rate fell to 7.2% last month, the lowest level since July, and she believes that the black unemployment rate is a sign of the direction of the overall job market.
Samuel Tombs of Pantheon Macroeconomics remains sceptical, attributing January’s job gains in part to unusually warm weather boosting hiring. He noted that construction companies added 33,000 jobs last month. “We believe it is premature to conclude that the labor market has completely improved,” he wrote.
Last year’s sluggish job market did not match the economic performance.
From July to September, U.S. gross domestic product (i.e., output of goods and services) grew rapidly at an annual rate of 4.4%, the fastest rate in two years. Consumer spending is strongrising exports and falling imports drove economic growth.
Economists are wondering whether job creation will eventually accelerate to catch up with strong growth, perhaps as President Donald Trump’s tax cuts translate into huge rebates that Americans start spending this year. But there are other possibilities. GDP growth could slow and be consistent with a soft labor market or advances in artificial intelligence. Automation could mean the economy grows without as many jobs.
West Shore Home is a thriving remodeling company in south-central Pennsylvania with 3,000 employees. West Shore plans to hire about 200 workers by 2026, similar to last year.
Many homeowners cannot afford or don’t want to sell after locking in cheap mortgages years ago. Instead, they are improving the places they own.
Like many other businesses, artificial intelligence has made its way into West Coast Homes. Chief Human Resources Officer Jessica Bittinger said the company is starting to use artificial intelligence to streamline tasks such as scheduling projects. She doesn’t expect companies to lay off employees because of AI, but she also believes they won’t need to hire as many people in the future. “It helps our employees work smarter, not harder,” she said.
Wednesday’s jobs report could cause the Fed to further delay further interest rate cuts. Some Fed officials singled out last year’s weakness in hiring as a sign that borrowing costs are weighing on economic growth and hampering business expansion. The increase in hiring, if sustained, would weaken that view.
Fed officials hinted December Based on futures pricing, they expect another cut to the key rate this year, while Wall Street investors expect two cuts.
Wednesday’s report includes the government’s annual baseline revision, which is designed to take into account more accurate employment data reported by employers to state unemployment agencies. In the year to March 2025, they cut 898,000 positions.
The revisions, which could reflect more accurate information about businesses opening or closing, cut the total number of jobs created between April and December last year to 120,000 (or 13,000 per month) from an initially reported 251,000 (or 28,000).
Despite recent high-profile layoffs, the unemployment rate looks better than the hiring data.
That’s partly because President Donald Trump’s immigration crackdown has reduced the number of foreign-born people competing for jobs.
As a result, the number of new jobs the economy needs to create to prevent rising unemployment has fallen sharply. Researchers at the Brookings Institution believe that number may now be as low as 20,000 and continue to fall.
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AP Retail Writer Anne D’Innocenzio in New York and AP Economics Writer Christopher Rugaber contributed to this report.