US employment growth last year was historically anemic. Yet, US job growth at the start of this year was noticeably stronger than anticipated.
In Wednesday’s jobs report—a “Schrödinger’s cat” of employment figures—both seemingly contradictory trends held true.
The US economy added approximately 130,000 positions last month, and the unemployment rate edged down one-tenth of a percentage point to 4.3%, according to the latest figures from the Bureau of Labor Statistics (BLS).
This significantly surpassed economists’ projections for a net gain of only 75,000, and the total jobs added in 2025 tallied just 51,000 fewer than the 51,000 jobs created that year.
January employment reports are typically among the trickiest: seasonal post-holiday hiring quirks are common, and this is when the BLS applies statistical fine-tuning that can substantially alter the perception of past labor market performance.
Nonetheless, this complicated and noisy jobs report offered a degree of clarity on what the current year might hold for American households and the broader economy.
“The labor market appears to be stabilizing,” Heather Long, Chief Economist at Navy Federal Credit Union, told CNN. “This is the first step toward a recovery.”
Strong and Weak Signals
January marked the best performance for job creation since December 2024.
Healthcare and social assistance accounted for the lion’s share of last month’s employment gains, reportedly adding about 123,500 jobs.
This was followed by 34,000 jobs in professional and business services, encompassing roles in staffing, administration, and other white-collar fields. Construction likely benefited from unusually warm weather early in the month, contributing 33,000 jobs.
Many other sectors, particularly government employment (-42,000 jobs), either shed workers or reported very tepid growth.
Wednesday’s employment release also incorporated a suite of data adjustments—including the annual benchmarking, the yearly refresh of seasonal adjustment factors, and revisions to how the BLS captures employment changes at new and closing establishments—which revealed that job gains in prior periods were considerably weaker than previously calculated.
Notably, the US economy added only 181,000 jobs in 2025, compared to the previously estimated 584,000. This marks one of the worst years for job creation outside of a recession, BLS data shows.
The annual benchmark revision, which reconciles monthly payroll estimates derived from a survey with more detailed but lagging data from quarterly employer tax filings, indicated that 898,000 fewer jobs were added between April 2024 and March 2025.
After seasonal adjustment, the shortfall was 862,000—the second-largest negative adjustment recorded since 1979 (after 902,000 in 2009), according to BLS data.
Such large swings, whether positive or negative, usually occur during periods of rapid and significant economic shifts.
The most probable causes for last year’s substantial shift included lower survey response rates, models that previously failed to accurately reflect job creation and destruction at new and closing firms, and measurement errors (such as counting contract or informal workers, or initially reporting more immigrants in surveys than reflected in unemployment insurance claims).
Core Momentum Persists
The headline figures on job growth and unemployment should ease concerns that the US labor market is in danger of deteriorating, noted Josh Hirt, Senior Economist at Vanguard.
With a caveat.
“I don’t think this report should be taken as definitive proof that the labor market is accelerating right now,” he added.
This is because the underlying momentum of the labor market has not radically changed month-to-month.
Beneath the surface, the US economy is likely experiencing an “unemployment expansion,” explained Greg Daco, economist at EY-Parthenon, to CNN.
Costs of the ‘Unemployment Enlargement’
It is also a labor market in transition.
According to him, considerable pressure is being exerted simultaneously on both the demand for labor and the supply of available workers.
The combination of the Trump administration’s historic deportation drive and the aging of the massive Baby Boomer generation means the economy doesn’t need to add many jobs to keep unemployment stable, Daco pointed out.
This break-even hiring level is now “very close to zero or potentially negative,” he stated.
Simultaneously, worker demand has softened, giving employers the upper hand and restraining wage increases.
The resulting income stagnation is a serious worry for many families, Daco remarked.
This dynamic might present itself acutely at the kitchen table discussions already bogged down by affordability issues. New data this week showed a rising percentage of Americans struggling with escalating expenses and an increasingly burdensome debt load.
Arguments for Optimism
Wednesday’s report confirmed the labor market is neither collapsing nor booming, Hirt observed.
Rather, he said, it paints a picture of stabilization.
And this trend could prove critical for US households and the economy later this year, he added, noting that the first half of the year might be “a bit choppy.”
He anticipates job creation will likely proceed more moderately until the second half of the year, when more “pro-growth” factors are expected to materialize.
Large tax refunds, anticipated to stimulate consumer spending and thus the economy, are coming; new tax credits could incentivize hiring and spur further productivity-related investments in AI and infrastructure; and uncertainty and volatility stemming from trade issues and other large policy shifts should subside, he noted.
“We think all those factors should lead to both growth and hiring,” he concluded.
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