Employers kicked off 2025 with another dip in the unemployment rate, despite a slowdown in U.S. job growth, according to data released Friday morning.
Coming in ahead of consensus forecasts compiled by Trading Economics, the unemployment rate edged down to 4.0 percent in January, according to the Bureau of Labor Statistics. This marks a slight improvement on December's reading of 4.1 percent, and a second consecutive drop in the unemployment rate.
However, nonfarm payrolls data released alongside the unemployment figures came in below forecasts, with only 143,000 jobs added in January. While this is on par with average monthly gain of 166,000 in 2024, it is well below the higher-than-expected increase of 256,000 jobs in December, revised up 51,000 with Friday's announcement to 307,000.
Why It Matters
Both the unemployment rate and job growth, as well as being general health indicators for the U.S. economy, closely inform monetary fiscal policies. High unemployment often prompt stimulus measures or interest rate cuts by the Federal Reserve, while low unemployment might lead to tightening policies to prevent overheating.
As the first reading covering Donald Trump's return to the White House, January's figures will also likely be used as a baseline for assessing the economic success of his administration and the impact of the his policies—in particular the approach toward taxes, tariffs and immigration—on the U.S. labor market.
What To Know
According to the Bureau of Labor Statistics, gains were made in health care, retail trade and social assistance, while the mining, quarrying and oil and gas extraction sector experienced a decline.
Despite some previous expectations that the California wildfires and particularly harsh winter conditions across much of the country would impact job growth, the Bureau of Labor Statistics noted that these events had "no discernible effect" on the results for January.
Thanks to a particularly strong December, the U.S. economy added over two million jobs in 2024, in keeping with gains made from 2017 to 2019 but well below the post-pandemic labor boom, which saw the unemployment rate fall from a historic peak of 14.9 percent in April 2020 to a 53-year low of 3.4 percent in January 2023.
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Total unemployment data from the Federal Reserve Bank of St Louis—which factors in those working part-time in search of full-time employment, and people "marginally attached to the labor force"—has also evened out at 7.5 percent, equal to December's revised reading, having edging up over 2023 and much of 2024.
Despite positive trends in the unemployment rate, recent data from the Labor Department found that the number of unemployed claimants in the U.S. had increased to 1.9 million, showcasing the continued challenges facing the job market despite recent progress.
What People Are Saying
"Amid all the jitters about President Donald Trump's tariffs, the January jobs report will likely send a comforting signal about the health of the economy at the start of the year," EY Senior Economist Lydia Boussour said prior to the data's release, as quoted by TheStreet.
Former President Joe Biden, on the release of December's figures last month, said: "Although I inherited the worst economic crisis in decades with unemployment above 6 percent when I took office, we've had the lowest average unemployment rate of any administration in 50 years with unemployment at 4.1 percent as I leave."
White House press secretary Karoline Leavitt said in a memo sent out following Friday's report: "Today's jobs report reveals the Biden economy was far worse than anyone thought, and underscores the necessity of President Trump's pro-growth policies. During his first weeks in office, President Trump declared a national energy emergency to Make America Energy Dominant Again, pledged to cut ten regulations for every new regulatory action, and outlined a plan to deliver the largest tax cut in history for hardworking Americans. President Trump is delivering on his promise to restore our broken economy, revive small business optimism, create jobs, and ignite a new Golden Age for America."
Ruth Milkman, labor scholar and professor of sociology at The City University of New York, told Newsweek:"Trump inherited a tight labor market and a very healthy economy from the Biden-Harris administration, as the January unemployment data confirm once again."
However, she warned that the potential impact of tariffs and deportations "could be massive," adding: "The large tariffs under consideration would spur inflation if implemented and create shortages of vital goods. Deportations would further tighten the labor market and potentially disrupt product markets, especially for food."
Rebecca Dixon, president and CEO of the National Employment Law Project, a federal worker's rights advocacy, told Newsweek that January's job number "reflect the continuing strength of the Biden economy." However, she added that the Trump administration's posturing toward the federal workforce and migrant workers "threaten to destabilize the economy."
What Happens Next?
As the new administration gets into gear, many are wondering what the knock-on effects of Trump's trademark policies—in particular the imposition of tariffs and his far-reaching deportation program—will have on the U.S. labor market.
While the deportation of undocumented migrants would likely have no impact on the reported unemployment rate calculations, researchers from the Peterson Institute of International Economics estimate that this could "prompt US business owners to cut back or start fewer new businesses," reducing employment opportunities for U.S. citizens in the long term.
Should the administration succeed in its attempt to trim down the workforce at the federal government—the nation's largest employer—this could also weigh on future job statistics.
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Update 2/7/25, 10:42 a.m. ET: This article has been updated with the White House's response to the January report, as well as additional context on the employment figures from the Bureau of Labor Statistics.
Update 2/7/25, 11:28 a.m. ET: This article has been updated with comment from Ruth Milkman and Rebecca Dixon.
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