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January Employment Report Outperforms Expert Predictions
The Bureau of Labor Statistics released its January employment report today. Despite a Dow Jones consensus of 55,000 jobs, the bureau reported 130,000 new jobs added to the economy.
Industries such as construction, healthcare, and social assistance experienced job growth, while hiring in sectors such as government and financial services continued to decline. There was a decline in the unemployment rate from 4.4 percent last month to 4.3 percent.
Owing to the Trump administration’s commitment to reducing the federal workforce, the rise of artificial intelligence, and policy changes like tariffs that affect the goods-producing sectors, the service-providing industry was the only of the three main economic sectors to achieve real job growth in 2025, according to the Federal Reserve Bank of San Francisco.
Even in the age of artificial intelligence, it seems there’s no substitute for hands-on service when it comes to healthcare. There were major gains in sectors like ambulatory health care, hospitals, nursing and residential care facilities, and social assistance.
Last week, the bureau released its summary of job openings and labor turnover for December, showing job openings at 6.5 million, down 386,000. Industries such as retail, real estate, finance, insurance, and professional services all declined.
Looking at the sectors with job growth and those without, labor demand appears to be sector-specific, as evidenced by 7.6 million people unemployed and a report from the consulting firm Challenger, Gray & Christmas detailing a record number of layoffs in January.
Notably, the lack of full-time jobs and a relative freeze in hiring over the past year has not led more people to stop looking for work altogether. The number of “marginally attached workers,” people who want a job but are not actively searching for one, saw a slight decline in January. Within this group, there are 475,000 classified as “discouraged workers” who have given up hope of finding employment, effectively dropping out of the labor force despite their desire to work.
Given the moderate rise in long-term unemployment, up 386,000 workers from a year earlier, it’s reasonable for job seekers to be concerned about the career paths and roles available. While age is less of a determining factor in employment trends, educational attainment appears correlated with who’s getting hired. For workers with less than a high school diploma, the unemployment rate is 5.2 percent, compared to just 2.3 percent for those with bachelor’s degrees or higher.
By 2029, the Labor Bureau projects that the U.S. will lose 1 million office and administrative support jobs to automation. Conversely, workers seeking roles such as software engineer, database architect, or administrator can expect “faster than average” job growth. Yes, companies will be hiring, but for positions that will require a baseline level of prior training or education.
These jobs likely require a different skill set than that acquired by laid-off workers from traditional sectors, such as federal government work, which has seen a 10.9 percent workforce reduction since it peaked in October 2024.
There’s more reason to be cautiously optimistic about the job market. Fewer workers faced the choice of involuntary part-time employment, meaning their hours were reduced, or they would prefer full-time work but couldn’t find it. There were 453,000 fewer workers in that category in January, although it rose by 410,000 over the past year to 4.9 million.
As economists debate the challenges facing the U.S. in 2026, labor market uncertainty seems top of mind. In a speech at the Economic Club of Miami last week, Federal Reserve Governor Lisa Cook called out the “mismatch between the arrival of costs related to AI investment and the arrival of benefits,” namely, the lack of productivity gains relative to the money funneled into the industry.
There’s reason to question the manner in which artificial intelligence is integrated into the workforce. On one side, it’s mostly been a boon to workers, according to a report by the International Center for Law & Economics. Researchers there found that about 80 percent of U.S. workers have “at least 10% of their tasks exposed to LLM assistance.”
Of course, there’s no guarantee that companies will always use artificial intelligence alongside human labor. The Massachusetts Institute of Technology has already found that widespread adoption could mean the replacement of “11.7 percent of the U.S. labor market,” the equivalent of about 17 million people, or $1.2 trillion in wages.
How do American workers upskill at a pace that allows them to take advantage of technological advancements like artificial intelligence? And how long will unemployed Americans continue to job hunt for months, only to find out the job they’re qualified for no longer exists?
Interestingly, people currently employed are likely making more now than they did a year ago. Over the past 12 months, wage growth for all private-sector employees has outpaced inflation, with average hourly earnings up 3.7 percent.
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