Jobs surge in January but overall trend remains sloppy

Executive summary

U.S. payrolls added 130,000 in January, nearly double the 70,000 expected by the consensus. However, there were sizable downward revisions for last year, lowering the per month average to 15,000 for all of 2025. Despite the strong January print, the six-month average was just 14,167.

Other labor trends improved, as wages, hours worked, and the participation rate all rose, while the unemployment rate ticked lower again. Yet, the job growth remains overly concentrated, which is problematic; specifically, the overreliance on health care.

We’re less concerned about the weaker 2025, which reflects a sloppy 2025 marked by solid overall economic growth but weaker demand for jobs. In other words, 2025 was good for gross domestic product (GDP) but had very little job growth. Conversely, there’s scant evidence of mounting job losses insofar as most workers aren’t lined up for unemployment benefits. Alas, the “low hire/low fire” environment persists. Looking ahead, this muddled picture complicates the read on the economy for policymakers at the Federal Reserve (Fed). After last year’s preemptive rate cuts, the Fed will likely remain on pause in the near term. 

Payroll trends – Benchmark revisions show weak trend

Each January, annual benchmark revisions are released, adjusting monthly employment figures using more accurate and comprehensive data sourced from state unemployment insurance records. The 2025 benchmark revisions reduced the total number of jobs by 862,000, considerably larger than -598,000 in 2024.

Nonetheless, the economy added 181,000, or just 15,000 per month for all of 2025 following annual benchmark revisions. The total U.S. nonfarm payrolls are at 158.6 million, which is an all-time high.

Service-providing industries hired 136,000 workers in January. Goods producers added 36,000, which was the most since June 2023.

Government payrolls declined by 42,000 last month. Federal layoffs were a consistent drag in 2025 and early 2026, eliminating 324,000 positions, primarily because of the Department of Government Efficiency (DOGE). That included -34,000 in January. States sliced 18,000 positions. But local governments added 10,000 workers, which were entirely non-educational positions.

A review of the major industry trends

Six of the 11 major industry groups hired payrolls in January, the same as December.

It was led by the education/health services industry group, which added an outsized 137,000 during the month. That’s the most since August 2020. Roughly 90% were within health care, which remains the U.S. economy’s proverbial bell cow. Private education services added 13,000 jobs during the month.

Professional & business services posted the second most in January and benefited from the revisions, swinging November and December to gains. Part of the improvement was within temporary help, which hired 9,100 workers in January and has now added workers for three straight months – a feat that hasn’t been accomplished in almost four years.

Construction also swung back to gains from job losses during December. Over 90% were hired by specialty trade contractors and were mostly at commercial specialty contractors (aka nonresidential).

Conversely, the financial activities segment was second-worst in terms of job losses (behind government).  It was seemingly across the board, except for securities, commodities, & investment firms, which added 3,100 during the month.

Unemployment rate down, but hours worked and wages up

The unemployment rate slipped to 4.3%, falling by 0.1 for the second consecutive month. It remains above the pre-pandemic 3-year average of 4.0%. However, it remains low compared to the historical average of 5.7% since 1948.

The broader underemployment rate (U-6) has declined sharply over the past few months, dropping to 8.0% in January from 8.7% in November. Still, it’s above the pre-pandemic 3-year average of 7.8%.

The labor force participation rate rose to 62.5%. It remains 0.8% below the pre-pandemic rate of 63.3%.

Average weekly hours worked rose by 0.1 to 34.3, which is a tick below the pre-pandemic average of 34.4. Within manufacturing, hours worked rose by 0.1 to 40.1, while overtime hours were unchanged at 2.9, where it’s largely been for the better part of three years.

Average hourly earnings rose by 0.4% month over month, slightly above the pre-COVID three-year average. Annual wage growth was 3.7% for all workers, which remains above the pre-pandemic average of 3.0%.

Wages for rank & file workers—officially known as production & nonsupervisory employees—also rose 0.4% during the month, boosting the annual average to 3.8%, well above the pre-pandemic average of 3.0%.

Our take

We were surprised by the strong January headline growth of 130,000, though it’s plausible that it was a bit of a catch-up from the partial government shutdown months (October and November).

The massive downward annual benchmark revisions – carving off 862,000 jobs – are notable, sharply marking down 2025 job growth to a paltry 15,000 per month. However, it does track with the overall weaker hiring vibe we’d anecdotally heard throughout the year. 

Conversely, multiple labor market indicators – from continuing claims and ADP to job openings and hiring rates – show that the “low hire/low fire” environment persists. But it also doesn’t jive with solid overall economic growth witnessed last year.

To wit, there’s scant evidence of mounting job losses insofar as most workers aren’t lined up for unemployment benefits. Alas, the “low hire/low fire” environment persists. Ultimately, 2025 was good for gross domestic product (GDP) but had very little job growth.

Looking ahead, the sloppy trend complicates the assessment of the economy for Fed policymakers. Given the three preemptive rate cuts late last year, we anticipate that the Fed will likely continue to hold policy rates steady in the near term. 

Bottom line

January job gains were stronger‑than‑expected, though this may have been a catch‑up from earlier government shutdown disruptions. The massive benchmark revisions cut 2025 job growth to a meager 15,000 per month, aligning with a broadly weaker hiring backdrop. Despite solid economic growth, labor indicators continue to signal a “low hire/low fire” environment. This will likely keep Fed policymakers on pause in the near term.