The US labor market showed moderate growth at the start of the year, as total nonfarm payrolls employment increased by 130,000 in January, according to the latest Employment Situation report released today by the Bureau of Labor Statistics (BLS). The unemployment rate remained unchanged at 4.3%, signaling continued labor market stability despite slowing hiring momentum compared with previous expansionary periods.
The January figure reflects a mixed but resilient labor landscape. While job creation continues, the pace remains relatively modest, particularly when contrasted with stronger periods of hiring in prior years. On average, payroll growth in 2025 was nearly flat at +15,000 per month, underscoring a cooling trend in overall employment expansion.
Sector Breakdown: Health Care and Construction Lead, Government and Finance Decline
Job gains in January were concentrated in specific sectors:
- Health care added 82,000 jobs, driven by increases in ambulatory health services (+50,000), hospitals (+18,000), and nursing facilities (+13,000).
- Social assistance employment rose by 42,000, largely in individual and family services.
- Construction gained 33,000 jobs, particularly in nonresidential specialty trade contractors.
However, offsetting some of these gains:
- Federal government employment declined by 34,000, continuing a broader contraction that has reduced federal payrolls by 327,000 since their October 2024 peak.
- Financial activities shed 22,000 jobs, with insurance carriers accounting for roughly half of the losses.
Other major industries, including manufacturing, retail trade, transportation, professional services, and leisure and hospitality, saw little change.
Unemployment and Labor Force Trends Remain Steady
The household survey showed the unemployment rate holding steady at 4.3%, with 7.4 million Americans unemployed. However, this remains higher than a year earlier, when unemployment stood at 4.0%. Long-term unemployment also remains elevated, with 1.8 million individuals jobless for 27 weeks or more, accounting for 25% of all unemployed workers.
The labor force participation rate remained at 62.5%, and the employment-population ratio held at 59.8%, indicating limited movement in broader workforce engagement.
One positive development came from a decline in involuntary part-time employment. The number of people working part time for economic reasons fell by 453,000 to 4.9 million, though this remains higher than levels seen a year ago.
Wages Continue to Rise
Average hourly earnings for private-sector workers increased by 15 cents (0.4%) to $37.17, marking a 3.7% year-over-year increase. Production and nonsupervisory employees saw similar monthly growth of 0.4%.
The average workweek edged higher to 34.3 hours, suggesting slightly improved labor utilization. In manufacturing, the workweek rose to 40.1 hours, while overtime held steady.
Revisions and Benchmark Adjustments Signal Softer Backdrop
The report also included annual benchmark revisions. Updated data from the Quarterly Census of Employment and Wages lowered total nonfarm employment for March 2025 by 898,000 jobs. In addition, officials reduced November and December payroll gains by a combined 17,000 jobs.
Notably, total job growth for 2025 was revised from +584,000 to +181,000, indicating that the prior year’s labor market strength was significantly weaker than initially estimated.
Market Impact: Stocks, Dollar, and Bonds React
Financial markets are closely analyzing the data for clues on Federal Reserve policy direction.
- Equities may interpret the report as moderately supportive, as steady job growth combined with contained wage pressures suggests economic resilience without overheating.
- The US dollar could see mixed reactions, as stable unemployment reduces urgency for aggressive rate cuts but slower payroll momentum tempers hawkish expectations.
- Treasury yields are likely to fluctuate based on how investors weigh wage growth and benchmark revisions.
With job growth slowing but remaining positive, and wages still rising at a controlled pace, the report reinforces the narrative of a labor market that is cooling gradually rather than collapsing.
Outlook: A Delicate Balance for the Fed
The January employment data presents a nuanced picture. While payrolls continue to expand, the pace remains modest, and revisions suggest prior strength was overstated. At the same time, unemployment remains historically low and wage growth is steady.
For policymakers, this combination may support a data-dependent approach, with attention shifting to upcoming inflation readings and broader economic momentum.
For investors and traders, today’s release underscores that while the US labor market remains resilient, signs of moderation are increasingly visible, a balance that will shape market direction in the weeks ahead.
