Economy adds 143,000 jobs in January, reflecting a slower but solid pace of growth this year

The U.S. economy picked up 143,000 jobs in January, a slower but solid pace to start the new year, even as the California fires and data revisions to employment figures weighed on the job gains.

The unemployment rate ticked down to 4%, a low level as employers have held onto workers despite slower hiring.

January’s job gains, which fell short of forecasts, also showed the labor market slowing compared to December, which was revised Friday to show 307,000 jobs gained that month. In fact, job growth figures for December and November were revised up by a combined 100,000, reflecting a hotter hiring pattern toward the end of 2024.

Economists say that disruptions related to the catastrophic Los Angeles fires and severe winter storms dampened job gains in January. But the labor market proved strong enough to withstand those disruptions with a solid showing.

“The labor market is looking pretty solid, but we’re going to have to take this report with the context that it might be less clear as to what’s going on exactly,” said Cory Stahle, an economist at the jobs site Indeed.

Average hourly wage growth accelerated, rising by 4.1% over the past 12 months, to $35.87 an hour, outpacing the rate of inflation and boosting workers’ pocketbooks. Those pay gains could give the Federal Reserve more reason to wait to lower borrowing costs.

The report arrives during a moment of political upheaval. It’s too early to say how the Trump administration’s policies, including raising tariffs, lowering taxes, restraining immigration and gutting the federal workforce will weigh on the overall economy with much of the planning influx.

But the possibility of new and countervailing economic forces is muddying analysts’ understanding of where the economy is headed. Some argue that President Donald Trump’s policies could spark higher prices and a hotter labor market later in 2025.

“Our forecast assumes tariff rates rise, tighter immigration policies and another round of fiscal stimulus from tax cuts negotiated this year,” said Bill Adams, chief economist at Comerica Bank. “That translates into an economy that continues to run hot with ongoing inflationary pressures and a tighter job market by the end of this year.”

Major stock indexes reacted with muted enthusiasm to Friday’s jobs gains. The S&P 500 rose by 0.25% in the morning, and the Nasdaq composite index inched up 0.1% during early morning trading.

Given the uncertainty, Federal Reserve policymakers have hit pause on interest rate cuts, holding rates steady at a meeting last week, as they wait to see how the economy, which had been growing at a steady pace, will fare under Trump.

“Today’s jobs report has likely taken a March rate cut off the table,” said Seema Shah, chief global strategist at Principal Asset Management in an analyst’s note. “Aside from a slightly disappointing headline payrolls number, the broader picture is still one of labor market resilience and sustained wage pressures.”

Job gains continued to be powered by a handful of service-related sectors, including health care, government, retail and social assistance. Health care, which faces the growing demands of an aging baby boomer population, added 44,000 jobs. The public sector created 32,000 jobs, and retail payrolls rose by 34,000.

Employment levels barely budged in other major industries – including construction, manufacturing, wholesale trade, transportation and warehousing, information, financial activities, professional and business services, and leisure and hospitality. Mining, quarrying, and oil and gas extraction industry lost about 8,000 positions.

But the White House’s mission to shrink the federal workforce, including by incentivizing workers to resign and ending telework policies, appears to be taking a hit to the public sector and have trickle-down effects for other industries. That could begin to show up in February’s jobs report to be released in early March.

Wages are still outpacing the rate of inflation, but years of rapidly rising prices combined with the solid labor market have driven more people to find second and third jobs: 5.3% of workers held more than one job in January, the highest level since 2019.

Jeremiah Mejia, 31, a father of four, works as a cook at two Wingstop locations in Los Angeles. After getting a job at the fast-food franchise in 2023, he sought work at a second location last year. His managers were scheduling him less than 40 hours a week, he said, making it impossible to support his wife and kids with just one job on his $20-an-hour wage.

“It’s difficult to support my family right now,” Mejia said, “especially my kids because they need things like clothes, backpacks, school supplies.”

Economists say that last month’s fires in Los Angeles, which displaced more than 100,000 people and pushed many out of the labor market temporarily, weakened the labor market in January. Freezing temperatures and snow storms on the East Coast and Sun Belt also forced people to stay home from work last month.

Despite strong gains at the end of the year, annual revisions released Friday provided evidence of a softer labor market in 2024 than previous estimates had indicated.

Those adjustments showed that employers added 589,000 fewer jobs than initially estimated in early 2023 and early 2024. Preliminary revisions released in August had pegged that figure at 818,000 fewer jobs, which provoked accusations from then-Republican presidential nominee Trump that the federal government had earlier manipulated statistics to improve the image of the Biden administration.

Friday’s report solidified President Joe Biden’s record of going an entire term without a single month of job losses.