The January Employment Report showed a stable US labor market entering 2025, adding a 143,000 to payrolls while the unemployment rate fell to 4.0% from 4.1% in December. This brief looks through the noise of annual benchmark and population adjustments to find a labor market that has largely normalized and that remains resilient at the start of 2025.

Trusted Insights for What’s Ahead^®:

• Job growth remained solid in January, adding 143,000 to payrolls with upward revisions to November and December. Additionally, California wildfires and winter weather likely impacted topline numbers.
• Annual BLS data updates added 2.0 million to household employment by capturing Census Bureau immigration counts, while benchmark revisions cut a smaller-than-anticipated 589,000 from payroll gains over the 12-months ending March 2024.
• Wage growth remains elevated, rising 0.5% in January as labor market tightness persists. Low worker turnover may help ease wage pressures in 2025, but likely won’t offset aging and immigration labor supply challenges.
• Unemployment fell by 142,000 and the unemployment rate declined to 4.0% (excluding population controls), indicating that hiring remains at sufficient levels to keep labor market churn in balance.
• Despite major data adjustments, the core labor market narrative remains unchanged: Steady employment, low slack, and resilient wage growth signal a job market that is stabilizing rather than weakening heading into 2025.

Figure 1. Payrolls

Report Highlights:

Stability Through the Noise
The US labor market held steady to start 2025, with hiring maintaining a solid pace against the background of substantial annual adjustments to both the household and establishment surveys. Nonfarm payrolls added 143,000 in January, while the large gains from November and December were revised higher (partially due to adjustments). The unemployment rate fell from 4.1% to 4.0% and would have been lower if not for new population updates.

Job gains were led entirely by private service-sector industries, including healthcare (66,000 jobs added), retail trade (34,000), and arts & entertainment (14,800). Manufacturing and construction employment were flat in January. While recent monthly gains have been concentrated—especially in the healthcare and government sectors—employment growth has remained sufficiently broad, with more than 50% of sub-industries recording gains in every month since July’s downbeat report.

Note that January’s report was likely impacted by California wildfires and severe winter weather. BLS stated there was “no discernible effect” on national aggregates, however, the data shows weather-related spikes.

Wage Growth Resilience
The resilient labor market is also sustaining elevated wage growth (Figure 2). Average hourly earnings rose a higher-than-expected 0.5% month-over-month in January. While the annual increase declined to 3.8% from 3.9%, wage growth deceleration appears to be slowing in recent months. Monthly earnings growth was led by information, financial services, and other services (maintenance and personal services). While the labor market remains broadly stable, the persistence of wage growth above pre-pandemic levels mean that labor costs will remain a key inflationary factor moving into 2025.

Figure 2. Deceleration in hourly earnings growth begins to stall

Employment Level and Growth Pace Remain Solid
Multiple indicators suggest that the US labor market has largely stabilized and remains near its full-employment level (Figure 3). The employment rate of working-age Americans (aged 16-64) of 71.9% and for prime-aged (25-54) of 80.7% are each higher than their average 2019 levels. Yet, the total US employment ratio for all those aged 16 and older sits at 60.1% in January and diverged further from 2019’s 60.8% throughout 2024. These highlight that employment remains robust among the core working-age population, but is being offset by aging and retirements.

Figure 3. Employment rates remain above pre-pandemic levels

Strong employment levels alongside low slack—on top of demographic shifts—continue to constrain labor supply and sustain tight conditions. Unemployment remains low and indicators like layoffs and involuntary part-time work suggest little further loosening has occurred since the summer months. Worker turnover declined sharply in 2024, with separations and hires standing at 2013 levels in December. That may help soften wage growth going forward but data continues to reinforce a resilient but stable labor market.

Annual Adjustments: Large but Expected
The BLS’s annual payroll benchmark revision and population update introduced significant jumps in reported employment levels. The non-farm payroll benchmark revision resulted in a downward adjustment of 589,000 (or 49,000 per month) to the job gains in the 12 months ending March 2024. That was less than the 818,000 (or 67,000 monthly) preliminary estimate that BLS announced in August.

Household survey population controls were the other significant update. January’s report showed that household employment was 2.0 million larger than previously reported, while the US workforce was 2.1 million larger. The change reflects the annual true-up to align the household survey to the Census Bureau’s population estimates. In December, topline Census population estimates showed growth of 3.5 million over 2023 estimates. Of that increase, 2.8 million was attributed to net immigration. The household survey is not retroactively revised, meaning the population jump appears to occur between December and January.

The adjustments were widely expected, despite their magnitude. Analysts and Fed officials have informally discounted payroll gains since the BLS revision estimate in August. And because BLS population controls are based on an annual forecast, volatility in population inflows (e.g. immigration) are not accurately accounted for in real-time. By adjusting payrolls down and household employment up, the BLS revisions bring the household and establishment surveys into better alignment after post-pandemic divergence.

The adjustments do not change our understanding of the present labor market—although they do shed light on the economy’s past trajectory. Measures such as the unemployment rate, prime-age employment ratio, and wage growth suggest the labor market remains resilient and, across many metrics, more resilient than during the summer months when analysts feared the rise in unemployment could accelerate.

Conclusion
The January Employment Report reaffirmed a stable and resilient US labor market, even amid substantial annual data adjustments. While payroll growth slowed to 143,000, upward revisions to November and December and a drop in unemployment to 4.0% indicate that labor demand remains firm. Elevated wage growth continues—hourly earnings rose 0.5% month-over-month—and will continue to be a key factor in the inflation outlook.

Annual benchmark revisions and population adjustments reshaped past estimates over 2023 and early 2024 but did not alter the broader labor market narrative. The revisions better aligned the household and establishment employment estimates, providing a clearer picture of trends over the past two years. However, labor market fundamentals—including strong prime-age employment, low layoffs, and stable participation rates—continue to signal a healthy job market heading into 2025. With economic uncertainty lingering, the labor market’s resilience, rather than acceleration or deterioration, remains its defining feature.