A Solid January Jobs Report

Employers add 143k jobs, UR inches down to 4.0%

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New year, new president, same strong job growth.

U.S. employers added 143,000 jobs in January. That’s slightly fewer than expected, but the previous two months of job growth were revised upward by about 100,000. This also marks an impressive 49^th consecutive month of job growth.

The unemployment rate ticked down to 4.0% in January, the lowest level since May. More importantly, it fell for the right reasons and despite strong labor force growth; employment increased and unemployment decreased.

Another good sign: the prime age (25-54) employment to population ratio increased for the second straight month, making up for some of the sharp decline that occurred from September to November.

The bad news—if you really need some bad news—is that wage growth accelerated in January, with average hourly earnings rising too quickly for inflation to fall back to the Fed’s 2% annual target. Wage growth needs to come slightly closer to earth over the next couple months if we’re going to get more rate cuts in 2025.

Wages aside, however, this was a solid jobs report. The past three months saw the fastest job growth in almost two years, the labor force expanded, and unemployment remains at healthy levels. What’s not to like?

By Sector

Three sectors lost jobs in January, led by a sizable 11,000 decrease in professional and business services employment. This was largely due to the temporary help services category (think staffing firms), which has now lost about 641,000 jobs since early 2022.

I think it’s fair to attribute the job losses in mining and logging to frigid weather. The decline in leisure and hospitality employment was due to restaurants and bars losing nearly 16,000 jobs. Restaurant employment grew massively in December, so this could be the result of wonky seasonal adjustments around the holidays/turn of the year.

Private education and healthcare (but really just healthcare; private education actually lost jobs in January) continue to lead the way in terms of job growth, but it was also a good month for retail trade employment, with a lot of the hiring concentrated at warehouse clubs and supercenters.

Finally, it was another underwhelming month of job growth for the construction industry. You can see what Anirban had to say on that over at ABC.

Final Thoughts

The labor market remains in good health, but wage growth probably needs to slow for inflation to come back to its target level.

What’s Next?

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