The latest report from the US Bureau of Labor Statistics (BLS) shows that job creation in January 2025 was weaker than expected. Nonfarm payrolls increased by 143,000, lower than the Dow Jones forecast of 169,000, and down from a revised 307,000 in December 2024.
Despite the slowdown in job growth, the unemployment rate fell slightly to 4%.
2024 Data Revision: Employment Decreased
The report also contains a major revision to employment data for 2024. The BLS conducted its annual revision and found that employment should be reduced by 589,000 in the 12 months to March 2024. Previously, in an initial revision in August 2024, the BLS had estimated a reduction of 818,000 jobs.
In addition, the household survey showed a large increase in the number of people reporting employment, with a jump of 2.23 million workers. This change was due to an annual adjustment that takes into account population growth and immigration in the US. It is worth noting that this survey is conducted separately from the establishment survey, which is used to calculate overall employment.
Sectors Contributing to Job Growth
The increase in employment in January 2025 came primarily from the following sectors:
Healthcare: +44,000 jobs
Retail: +34,000 jobs
Government: +32,000 jobs
Social assistance: +22,000 jobsMeanwhile, mining-related industries saw a decline of 8,000 jobs.
Overall, the increase was still slightly below the monthly average of 166,000 jobs through 2024.
Labor Force Participation Rate Rises
While the unemployment rate fell, the labor force rose to 62.6%, up 0.1% from December. A broader measure of unemployment, which also includes those who are discouraged from looking for work and those working part-time for economic reasons, remained steady at 7.5%.
Market Reaction and Monetary Policy
Stock markets showed little reaction to the report, with stock futures posting small gains, while U.S. Treasury yields also rose.
Before the report was released, some economists had expected the California wildfires to weigh on employment. However, the BLS said the fires had no significant impact on the jobs data.
The January 2025 report is also the first since Donald Trump returned to office as US President on January 20, 2025. He has previously announced plans to cut taxes, boost economic growth, and rebalance global trade by imposing high tariffs on major US trading partners.
Meanwhile, Federal Reserve officials are monitoring the jobs data to determine the next steps in their monetary policy. The Fed cut interest rates by a full percentage point in the second half of 2024. However, most policymakers are now more cautious and taking a slower approach in making decisions on future interest rates.
Overall, the report shows that the US labor market is still expanding but at a slower pace than in the previous year.
