The unemployment rate fell from 4.4% in December.Some of the better-than-expected wage growth was due to seasonally sensitive sectors such as retailers and delivery companies hiring fewer holiday workers than normal last year. January is typically the biggest month for holiday-related layoffs. Given the low seasonal hiring, there were likely fewer layoffs, increasing wage gains.
Trade policy continued to cast a shadow on the labor market, they said, nodding to President Donald Trump’s threat last month of additional tariffs on European allies for rejecting his demands for the U.S. to buy Greenland. Trump later abruptly withdrew. The employment report, originally scheduled to be released last Friday, was postponed due to the three-day federal government shutdown.
Beginning with the January report, the BLS updated the birth-and-death model to include current sample information each month. This model, a method the BLS uses to estimate how many jobs were gained or lost as businesses opened or closed in a given month, is blamed for a payroll overcount.
The update to the birth-and-death model, which follows the same methodology applied to the April-October 2024 estimates after the annual payrolls revision, could result in as many as 50,000 fewer jobs being added to wage growth than in recent months, economists estimate. Despite the increase in labor costs in January, the labor market remains lackluster and has struggled even though economic growth has been robust. Concerns about jobs and high inflation have eroded Americans’ approval of Trump’s handling of the economy.
Economists say the Trump administration’s trade and immigration policies have cooled the labor market, though they expected tax cuts to boost hiring this year.
The US central bank left its key overnight interest rate in the range of 3.50%-3.75% last month.
White House economic adviser Kevin Hassett warned Monday of lower job growth in the coming months due to slower growth in the labor force. The Census Bureau said last week that the country’s population increased by just 1.8 million people, or 0.5%, to 341.8 million in the year ending June 2025.
Trump made the crackdown on US immigration a cornerstone of his election campaign. The BLS will introduce new annual population checks for the February employment report household survey next month, after they were postponed by last year’s 43-day government shutdown. These are adjusted for updated population estimates, including migration.
The unemployment rate is derived from the household survey.
Given the decline in the working-age population, economists believe the economy will need to create about 50,000 jobs per month or even fewer to keep pace with the growth of the working-age population.
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