Employers hired swiftly in January after a dismal 2025
- The San Juan Daily Star
- 9 hours ago
- 4 min read
By LYDIA DePILLIS
The U.S. economy put in a strong showing at the start of 2026, following a year of disruptions that depressed both the demand for labor and its supply.
Employers added 130,000 jobs in January, the Labor Department reported Wednesday, in a release delayed from last week by a short government shutdown. The unemployment rate fell to 4.3% from 4.4% a month earlier.
The peppier-than-expected reading is a sign that the labor market might be emerging from a period of extremely slow hiring brought on by a trade war that made companies hesitant to hire, an immigration crackdown that lowered the number of available workers and a federal government firing spree.
Annual revisions to earlier data, which are routine but have been larger than usual in recent years, darkened the picture of 2025. The economy added only 181,000 jobs last year, down from an earlier estimate of 584,000. Not counting the pandemic year of 2020, that is the slowest pace since 2010, the midst of the Great Recession.
“The revised numbers tell a more accurate story of what people were experiencing, which was really, really, really slow job growth and stagnation on a pretty major scale,” said Nicole Bachaud, a labor economist with the job search website ZipRecruiter.
For perspective, the economy added nearly as many jobs last month alone as the entire gain during all of 2025. “This is giving a glimpse of what might be a turning point for the market as stabilization is taking place,” Bachaud said. “This is a pretty significant shift.”
It’s too soon to tell if the January numbers represent a real acceleration. The numbers may have been flattered by a seasonal quirk: Retailers hired many fewer seasonal workers than usual over the holidays. If fewer were laid off in January, that would translate into a stronger reading after the Bureau of Labor Statistics adjusts for typical seasonal fluctuations.
The end of last year saw the lowest number of job openings since late 2017, and since last July there have been more unemployed people than there are jobs available for them. Measures of consumer sentiment have been downbeat — The Conference Board’s index of whether workers see jobs as easy or hard to find was as pessimistic in December as it’s been since early 2021, when the economy was still emerging from the pandemic.
But there is some evidence that the labor market may be grinding back into gear. Gross domestic product growth has been very strong, which could allow companies to make more investments that in turn increase their demand for labor. Surveys of manufacturers have been trending more optimistic, following two years of job losses and lackluster output. A broader measure of unemployment, which includes people working part time who would rather have more hours, dropped back to where it was last summer.
Companies are also expecting a boost from lower taxes and deregulation this year, as well as potentially lower interest rates if the White House stops raising tariffs and inflation recedes further.
“You’re hearing, ‘last year was pretty good all things considered, we survived the Trump tornado, and 2026 is looking all right, too,’” said Andrew Zatlin, managing director of SouthBay Research. “If I’m making all this money now, odds are the first quarter will also be super good.”
President Donald Trump celebrated the stronger-than-expected employment report on social media Wednesday morning and again called for lower interest rates. The Federal Reserve will see one more jobs report before it meets again in mid-March, but generally a falling unemployment rate is not seen as an argument for lowering borrowing costs, which tend to stimulate hiring. In fact, investors moved their expectations for the next rate cut to July from June after the jobs report was released.
It is not clear that the U.S. economy will be able to sustain this pace of growth. Part of the reason for the slow hiring last year was that the Trump administration clamped down on immigration and ramped up deportations. That helped keep the unemployment rate from rising drastically even as job creation slowed, since fewer people were looking for work.
January brought a good sign for labor supply. The share of people in their prime working years who are either employed or looking for a job reached 84.1%, the highest level since 2001. Still, the labor force is projected to flatline if immigration remains depressed.
One thing hasn’t changed from last year: Job growth continues to be dominated by health care, which packed on 82,000 jobs in January. Construction added another 33,000, mostly among the specialty trade contractors that have been very busy building data centers. The federal government lost another 34,000 jobs and is down by 10.9% since reaching a peak in October 2024.
“Health care has been carrying the load for the past couple of years in the private sector,” said Augustine Faucher, chief economist with PNC Financial Services Group. “I am concerned about the breadth of job growth, and the question is, how long can the economy continue to go with basically only health care adding jobs?”
Wage growth has remained strong; average hourly earnings for private sector workers rose 3.7% since this time last year, a pace that’s been fairly consistent for the past year and a half. The workweek also lengthened slightly, which will put more money in workers’ pockets.
Few analysts expect a strong rebound in manufacturing, which has shed 313,000 jobs over the past two years. But there are signs it could be finding its footing.
“I think we’re seeing a manufacturing environment that’s going to start to stabilize,” said Stephanie Roth, chief economist with Wolfe Research. “You tend to need to have a proper recession to have a real early cycle environment, but this could be like the mid-1990s, where you get a bit of a reset.”