January jobs report: Solid start to the new year

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor’s Lead Economist Daniel Zhao.

The January jobs report rings in the new year with a solid report. Payroll growth continues apace and the unemployment rate remains a healthy 4%. This jobs report is also the final jobs report for the Biden administration, bookending four years of economic surprises with a moderate finish.

Key stats:

January report breakdown

The slowdown in January was largely driven by several services sectors cooling down from a hot December. Leisure & hospitality grew by 49,000 in December but lost 3,000 jobs in January. Similarly, professional & business services slowed from 31,000 jobs added to 11,000 jobs lost and transportation & warehousing cooled from 21,500 jobs added to 1,100 jobs added.

The upward revisions to November and December also suggest a modest bump to the pace of jobs growth in the fourth quarter of 2024, though it’s hard to say that will be sustained into the new year when the overall job market stays on its cooling trend.

More detail than you wanted about revisions

Every year, January’s jobs report includes significant revisions to historical data, primarily through the annual benchmark update for the establishment survey and the population control update for the household survey.

Establishment survey

For the establishment survey, the annual benchmarking process synchronizes the more timely establishment survey data with slower but more complete unemployment insurance records. In August 2024, the BLS signaled preliminarily that the benchmark revision would likely subtract 818,000 jobs from the March 2024 employment level. In the January 2025 jobs report, the final benchmark revision was revealed to be -598,000 jobs, significantly smaller than the preliminary benchmark though still large. 

While this process is normal and well-telegraphed, the downward revision in this year’s benchmark update was the largest since 2009 on a numerical and percentage basis. One reason for such a large decline may be the difficulty in deciding whether survey non-respondents were simply too busy to respond or had closed down. When the job market slows and more businesses close, that can result in large downward revisions like in 2009.

Additionally, the post-pandemic period has been marked by much higher business churn with higher business formation and destruction that could make it unusually difficult to account for these issues. The large negative benchmark revisions in professional & business services (-316,000), leisure & hospitality (-121,000) and retail (-116,700) may support this explanation, as these industries have seen a surge in business churn post-pandemic (Table 2).

Household survey

For the household survey, new population estimates (called “population controls”) will be incorporated into the estimates of labor force statistics. It has been well understood that the previous population controls were significantly underestimating population growth, in large part due to underestimating immigration. As an aside, it’s also important to note that an underestimate of immigration can also counter-intuitively result in underestimates of native-born employment growth.

The BLS does not update population controls historically so figures from December 2024 and January 2025 are not directly comparable. Generally, rate statistics like the unemployment rate are less subject to change due to the population control updates whereas level statistics like native-born and foreign-born employment levels are likely to change.

The BLS does publish tables to offer comparability without the population controls. For example, in January 2025, the unemployment rate was reported as 4% compared to 4.1% in December 2024. If the population control process had not happened, the unemployment rate would have actually fallen even further to 3.9% (Table C).

Ultimately, the story of employment growth over the last year changes only slightly as a result of today’s revisions. Both sets of revisions point to a job market that slowed in 2024 slightly more than originally reported, but remain at a relatively healthy topline unemployment rate and monthly job growth rate. The slower than originally reported growth does reiterate that policymakers have little margin for error in continuing to cool inflation without slowing down the job market too much.

Turning the page to a new administration

The January jobs report is the last jobs report that captures data from the Biden administration. Over the last 4 years, employment growth grew 15.6 million, bolstered by the faster than expected recovery from the pandemic. Similarly, unemployment was 6.2% at the start of the Biden administration (February 2021), falling to 4% by the end (January 2025). By 2024, annual job gains cooled to 2 million, giving the new administration a round number to benchmark against in 2025.

Manufacturing is a politically sensitive industry, and over the course of the Biden administration, employment grew solidly in the 2021 and 2022,  but contracted in 2023 and 2024, ending at around where it was at the start of the pandemic. Under President Trump, tariffs introduce uncertainty as proponents argue they will bolster American manufacturing while detractors point to higher costs of inputs, but ultimately, a rebound to manufacturing growth will likely be a goal for the Trump administration in 2025.

Looking ahead to the start of President Trump’s second term, the question is whether inflation will get under control, allowing the reins on the job market to relax. A successful 2025 for the job market would look like inflation falling back toward the 2% target while job gains and unemployment tread water. A more ambitious goal of faster growth in 2025 than 2024 would likely require more growth in cyclical sectors like professional & business services and manufacturing that have slowed in recent years.

More insights

Payroll employment grew 143,000 in January 2025, slightly below expectations, but not far from the 2024 monthly average of roughly 166,300. November & December were revised up 100,000 in total.

The annual benchmark revisions don't change the overall story of a cooling job market, but it does highlight some different sectoral stories. For example, the contraction in manufacturing started earlier and has been deeper than originally thought. Professional and business services actually flips from sluggish growth in 2023–2024 to contraction, and information similarly contracted more than expected.

Looking at the long view, many industries slowed across 2023 and 2024, though after the latest set of revisions, there are some hints of a modest bump in jobs growth in Q4 in several services sectors like professional & business services, retail, transportation & warehousing, finance and information.

Average hourly earnings grew 4.1% year-over-year in January, unchanged from December. Wage growth has been a little hotter in the last few months on a monthly basis, but overall, wage growth remains close to a non-inflationary level.

The unemployment rate came in at 4% in January, a healthy level and still hovering a few ticks below the threshold for the Sahm rule recession indicator. Despite triggering on the Sahm rule in mid-2024, the unemployment rate has plateaued since.

Prime-age employment-population rose to 80.7%, the highest since September, still below mid-2024 highs. Similarly, prime-age labor force participation ticked up a bit but is also below mid-2024 highs. Both remain at historically healthy levels.

To speak with Daniel Zhao about this report, please contact pr@glassdoor.com.