Last week, the Bureau of Labor Statistics released its January 2026 Current Employment Statistics and Consumer Price Index (CPI) reports. Here’s what you need to know: Headline job growth exceeded expectations The private sector grew while government payrolls contracted Unemployment edged in a positive direction Inflation continued to cool Weekly paychecks are going farther These reports suggest stabilization within the American economy, contrary to economists on the Left and Right who have been quick to express labor and broad market pessimism. Total nonfarm payrolls blew past “expert” estimations of approximately 55,000 to 75,000—coming in hot at 130,000. Businesses continued to hire American-born workers, and such gains were driven by healthcare, social assistance, and construction sectors. While the doubling of employment expectations is a positive sign, expansion of healthcare and social service payrolls is complex. Though privately owned, these sectors are heavily subsidized by the government. Still, the most important takeaway is that meaningful progress has been made to reduce the number of federal government jobs and enhance the number of private employees. President Donald Trump inherited an economy that was expanding the public sector and shrinking the private sector. The January 2025 Employment Situation report showed 32,000 added government jobs and, after downward revisions, a loss of 48,000 private payrolls. The Trump administration’s efforts to reverse the harmful labor effects of the Biden years is finally bearing fruit. The January 2026 report illuminates total private sector employment increased by 172,000 and government employment decreased by 42,000. The data is astoundingly clear: the productive private sector is growing and the unproductive public sector is shrinking. Since government jobs add no real monetary value to the economy yet are funded by taxing or borrowing from the private sector, every dollar spent employing unnecessary government bureaucrats represents a dollar diverted from truly productive, wealth-creating private activity. Trump has made headway in contracting government payrolls by axing unnecessary federal employees and programs—which puts downward pressure on employment data. But despite this drag on the headline jobs number, nonfarm payrolls still rose significantly. And as the labor market reprivatizes by adding private payrolls and removing public drains, the productive part of the economy can grow, labor market can strengthen, and taxpayer funds can be utilized more efficiently. Progress has also been made encouraging more individuals into the labor market. The January 2026 unemployment rate stabilized at 4.3%, beating 4.4% expectations. An uptick in workforce participation and low unemployment suggests labor market resilience. In addition to employment stability, inflation signals continued cooling toward the Federal Reserve’s 2% target. Headline CPI approximated 2.4% year-over-year, down from 2.7% in December 2025. Driven by reductions in energy prices, this marks the lowest annual rate since May 2025. Core CPI approximated 2.5%, the lowest since March of 2021, reflecting that inflation is moderating. But these optimistic Bureau of Labor Statistics numbers may be an understatement, still. Truflation, a platform that provides real-time inflation data by tracking millions of prices per day, estimates real inflation below 1%. And with consumer prices cooling, Americans can enjoy a higher standard of living. In January 2026, average wages grew by 0.4% with CPI increasing only 0.2% month-over-month. As wage growth continues to outpace inflation, as it has done under Trump, affordability becomes achievable for more Americans. This is the exact opposite of what happened under the previous administration. Under President Joe Biden, what the average American could buy with his or her weekly paycheck fell by 4% due to 40-year high inflation. In just one year, Trump worked hard to push real paychecks up approximately 2%, meaning paychecks aren’t just bigger but they can buy more. With the BLS’s bullish employment and CPI reports depicting a moderating labor market and controlled inflation, the Federal Reserve is clearly behind the curve in terms of easing monetary policy. Federal Reserve Chairman Jerome Powell has been “too late” at reducing interest rates, but with expected Chairman Kevin Warsh soon to be at the helm, policy priorities to reduce the Fed’s balance sheet and cut rates would encourage a Main Street boom. Now, there is still significant work ahead to reinforce the labor market, bring inflation closer to target, and make up lost ground from Bidenomics, but the data positively reflects the meaningful progress that continues to be made in both direction and magnitude for employment and prices. The post Employment Up and Inflation Down New BLS Report Shows appeared first on The Daily Signal.