U.S. payrolls rose by the most in more than a year in January and the unemployment rate unexpectedly fell, suggesting the labor market will stabilize in early 2026.
The US labor market showed signs of stabilization in January 2026, with 130,000 jobs added and unemployment at 4.3%. (AFP)Employers added 130,000 jobs last month and the unemployment rate fell to 4.3%, according to data from the Bureau of Labor Statistics on Wednesday. This follows revisions from the previous year, which showed a marked slowdown in hiring. Last year, job gains averaged just 15,000 a month, down from the 49,000 pace initially reported.
The report suggests the labor market is finding its footing after a year marked by rising unemployment and minimal hiring. While economists expect hiring to generally slow in 2026, more clarity about the impact of President Donald Trump’s economic policies and lower borrowing costs could encourage some employers to increase headcount.
The January data reinforced the tendency of Federal Reserve officials to keep interest rates on hold for now. Traders have pushed their timeline for the next rate cut from June to July.
Leaving rates unchanged last month, Chair Jerome Powell noted signs of stabilization in the job market.
“Coming out of a hiring slowdown in 2025, this is welcome news,” said Heather Long, chief economist at Navy Federal Credit Union. “I think Fed Chair Powell was right – the labor market appears to be stabilizing.”
With the release of the employment report each January, the BLS benchmarks wages in a more accurate but less timely series called the Quarterly Census of Employment and Wages. This data is based on state unemployment insurance tax records and covers most US jobs.
This adjustment shows that job growth in the 12 months to March 2025 was about 900,000 lower than initially reported. The figure is roughly consistent with BLS’ initial estimates.
The hiring pickup in January was led by health care, which accounts for most of the job growth in 2025. Construction and professional and business services also added jobs, while manufacturing posted its first monthly employment gain in more than a year. Federal government salaries continue to decline.
Although layoffs are usually limited, Amazon.com Inc. From United Parcel Service Inc. There has been a wave of layoff announcements by companies like this one And heading into this year, job openings across the economy fell to their lowest level since 2020.
Two surveysThe jobs report is composed of two surveys, one of businesses – which produces payroll statistics – and another of households, which is the source of the unemployment rate. In the household survey, the participation rate — the share of the population that is working or looking for work — rose to 62.5% in January.
There were other positives, including the biggest drop in people working part-time from June 2022 for economic reasons. More workers quit their jobs, suggesting some confidence in their ability to find a new one. There was also a significant reduction in the number of people out of work for at least 27 weeks.
Wednesday’s release includes sweeping revisions to the employer survey. With the release of the January 2026 data, the BLS updated its so-called birth-death model, which accounts for the net number of business openings and closings. Economists noted that this change should improve the model’s responsiveness to current economic conditions and reduce the size of benchmark revisions over time.
Adjustments in job numbers have been larger than usual in recent years, which some economists attribute to unique post-pandemic dynamics. The revisions have also become highly politicized and were largely behind Trump’s firing of the previous BLS commissioner, after he claimed without evidence that data had been manipulated for political purposes.
While the January jobs report typically includes new population estimates in household surveys from the Census Bureau, those figures were delayed by a month due to last year’s record-long government shutdown. Trump administration officials in recent days have tried to reset expectations for the coming job numbers due to deportations and slower population growth.
Separately, the employment report showed that average hourly earnings rose 0.4% from December. Economists pay close attention to this metric as a driver of household spending.
Wednesday’s jobs report was originally scheduled for Feb. 6 but was delayed due to the partial government shutdown.
