The U.S. economy added 143,000 nonfarm payrolls in January, significantly below the 170,000 jobs economists had anticipated, according to the latest Bureau of Labor Statistics (BLS) report. Despite the slower job creation, the unemployment rate edged down slightly to 4.0%, unchanged from revised household survey figures, reflecting a labor market that continues to adjust to elevated interest rates.
Payroll figures for late 2024 received an upward revision: November and December gains were increased by a combined 100,000 jobs, buoying confidence that the labor market remains resilient despite the slowdown. Average monthly job growth in 2024, originally estimated at 186,000, now stands at 166,000 after the latest adjustments.
Industry-level data reveals that key sectors continued adding jobs. Health care led the way with 44,000 new positions, retailers added 34,000, social assistance contributed 22,000, and government roles increased by 32,000. However, mining and oil and gas extraction shed 8,000 jobs, while construction, manufacturing, and transport employment showed little movement.
Wage growth remained solid, with average hourly earnings rising 0.5% in January—the largest monthly increase in five months—and a 4.1% year-on-year gain. The average workweek dipped slightly to 34.1 hours from 34.2 in December. These dynamics indicate ongoing wage pressure, even as job growth slows.
Seasonal factors such as California wildfires and widespread cold weather had “no discernible effect” on the payroll numbers, though the household survey noted 573,000 workers missed shifts due to weather—the highest January impact since 2011.
Economists describe the report as a mixed but reassuring set of data. Scott Anderson, chief U.S. economist at BMO Capital Markets, noted: “There is still much to like about the U.S. labor market’s resilience and sustainability… report cements the view that the Fed could be on hold for a considerable time before cutting rates again” . Jeffrey Roach of LPL Financial described it as a Goldilocks scenario—not too hot, not too cold.
The labor market dynamics bolster the Federal Reserve’s cautious stance. A 4.0% unemployment rate offers flexibility for policymakers to pause before easing monetary policy. Market assessments now suggest that rate cuts are unlikely before June, with growing expectations for a potential easing by July.
Looking ahead, the Fed will closely monitor labor data alongside inflation signals from Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) figures. January’s job growth miss underscores that while the labor market remains healthy, momentum is potentially moderating.
In summary, January’s employment report shows a labor market that remains robust but is adapting to tighter monetary policy. Payroll additions fell short of forecasts, but strong wages and low unemployment will provide the Federal Reserve with room to pause before considering rate cuts—possibly later in mid-2025.
