January 2025 added 143,000 jobs, led by healthcare, retail, and government sectors. Job growth slowed amid new tariffs and federal hiring freezes, while the Great Stay trend continues with 4% unemployment.
Key Takeaways
- In January, the U.S. economy added 143,000 jobs, with 89% of job growth led by healthcare, retail, and government sectors.
- Unemployment decreased to 4%, even with the JOLTS report showing a decrease of 556,000 job openings in December.
- The Fed is putting rate cut talks on hold amid tariff-related inflationary pressures.
Solid January Growth with Uncertainty Ahead for Government and Manufacturing
In January, the U.S. economy added 143,000 jobs, 16% below the projected 170,000 by economists. This moderated growth, coupled with upward revisions of 100,000 jobs between November and December 2024, paints a stable but slower-out-the-gate start to the year. Growth continues to be focused on healthcare (+61,000), retail (+34,300), and government (+32,000) sectors, collectively accounting for 89% of January’s job growth.
Manufacturing (+3,000) and construction (+4,000) posted modest gains in January. Recent tariffs impacting trade with Canada, Mexico, and China, and specific tariffs on steel and aluminum imports are designed to protect domestic industries. Still, they are also expected to lead to job losses and increased production costs. Similar tariffs implemented in 2018 resulted in a 4.2% reduction in steel sector employment and an estimated loss of 75,000 jobs.
Source: NYTimes.com
According to recent data from Revelio Labs, most industries were looking to hire fewer workers in January 2025 than in January 2024. While the government sector showed 7.8% year-over-year growth in active postings for the month, headwinds are expected to impact the sector this year. This month, President Trump and DOGE enforced a federal hiring freeze, return-to-office mandates, and a “deferred resignation” program offering buyouts to federal employees. An estimated 65,000 federal workers have accepted the offer, though the buyout is currently held in court. The administration identified other government agencies as targets for reduction, with the most recent announcement that the Department of Education will see a $881 million reduction in funding.
Source: Revelio Labs
Employee Sentiment is a Mixed Bag
The labor force participation rate remained steady in January at 62.6% and has hovered between 62.5%-62.7% over the past year. With the rate of job openings sitting below pre-pandemic levels and a low share of workers quitting, the unemployment rate decreased month-over-month in January from 4.1% to 4%.
Many Americans have continued to stay put in their roles due to uncertainty in the market. This is a central hallmark of the Great Stay trend, but on a positive note, real wage growth is being realized for job stayers. Average hourly earnings increased 4.1% year-over-year, well above the 2.9% inflation increase over the same period.
So, how are workers feeling? ADP’s Employee Motivation and Commitment Index has been on an upward trend since mid-2024 and is up 15 points year-over-year. Sentiment has picked up in sectors like Information, where hiring has re-emerged amid lower interest rates and favorable policy changes set to catapult the advancement of emerging tech in areas like AI.
Source: ADP
Conversely, Glassdoor’s Employee Confidence Index measured a notable drop in confidence to 45.1% in January. This index measures the share of employees reporting a positive 6-month business outlook for their organization. Some anxiety-related keywords mentioned increased over the previous month, including inflation (+9%), layoffs (+5%), and recession (+29%). Notable drops in confidence were measured in the Government sector, likely related to layoffs and uncertainty.
Source: Glassdoor
Foreign-Born Workers Make Up 19.5% of the U.S. Labor Force
The U.S. Census Bureau has made significant changes this year in measuring the size of the US population. This emerged from a report released by the Congressional Budget Office in 2024 estimating significant population growth post-2020 due to the influx of immigration.
As of January, the number of foreign-born civilian laborers in the US was 33.3 million, with a labor force participation rate of 66%, exceeding the native-born participation rate of 61.4%. Immigrant labor heavily aided the US labor economy, particularly the success of the country’s post-pandemic recovery.
Asylum restrictions implemented by the Biden Administration in 2023 encouraged those seeking asylum to do so through lawful measures. In 2024, a more stringent border security executive order was enacted to limit high levels of migration. As more stringent immigration policy constricts this year under the Trump administration, many employers—especially those hiring in hourly healthcare, hospitality, and construction sectors—can expect to feel the squeeze of a more competitive labor market.
Source: Lightcast
Up Next: Rate Cuts Take a Pause
While January posted slower growth than initially predicted, it did mark the 49th month of consecutive job growth.
It’s anticipated that many similar factors will impact job growth for February: tariffs and trade policy changes, immigration policy changes, and federal hiring freezes. Also, natural disasters like the California wildfires and severe cold in other regions have already impacted sectors like accommodation, food services, and construction.
The jury is still out on the inflationary impacts of newly imposed tariffs, but the Federal Reserve has indicated they will wait several months before considering another interest rate cut. While the cautious monetary policy may temper job growth, sector-specific optimism, and increased recruitment activities could offset some negative impacts.
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