Key Points:
- Annual revisions did not change the overall picture of a resilient labor market.
- The labor market added 143,000 jobs in January, while the unemployment rate unexpectedly ticked down to 4%.
- Low unemployment and solid job gains provided a sturdy labor market foundation, but there are a few small cracks worth monitoring.
The foundation of the labor market remains incredibly sturdy. Revisions to the past year’s data may have rearranged a few rooms in the house, but they did not fundamentally change the structure. Despite somewhat smaller-than-expected job gains in January, the job market is kicking off 2025 with considerable momentum, with unemployment unexpectedly ticking down and wage growth picking up. The data continue to give the Federal Reserve ample flexibility to take a measured approach to cutting rates as it engineers an economic soft landing.
Payroll jobs grew by 143,000 in January. Gains were revised upward by 100,000 jobs for December and November, bringing the three-month average to 237,000 — slightly above 2023’s revised average. The unemployment rate remains low and ticked down to 4% from 4.1% the month prior. Wage growth also increased to 4.1% year-over-year in January, mirroring the slight reacceleration seen in the Indeed Wage Tracker data.
Still, despite the generally sturdy foundation, there are a few small cracks worth monitoring. Hiring and quitting activity remain near decade lows, and growth in prime-age labor force participation shows signs of slowing. The January report also does not fully capture the impact of wildfires in California, with those disruptions to be reflected in future reports.
Employers’ ability to maintain a “business as usual” attitude in the face of political noise, rapid policy adjustments, and ongoing geopolitical uncertainty has, so far, helped the overall labor market — and economy — maintain an even keel over the past few months. But past returns are no guarantee of future results, especially in this fast-moving, often volatile age.
