Labor Market Flexes Muscle and Exhibits Flab in Latest BLS Data

The latest jobs report from the Bureau of Labor Statistics swung in like a spider web: at once stronger than steel and softer than silk.

The strength was on display in January, when a reported 130,000 jobs were added to the US economy, more than double the Wall Street consensus estimate of 55,000. This resilience helped lower the unemployment rate by a tenth of a percentage point to 4.3%. But revisions to 2025 data showed the labor market has a soft side, too: the BLS now says the economy added a mere 181,000 jobs last year, way down from the previously estimated 584,000 and amounting to one of the worst non-recession years for job creation on record.

Jitters are for Quitters

In terms of challenges, the song remains the same. The number of jobs available, which hit a five-year low in December, is well below the number of people looking for work. Employers remain skittish about the economy, with AI and geopolitics top of mind, and more than half don’t plan to hire this quarter. The so-called “no-hire, no-fire” approach has taken hold. What job gains are being made are heavily concentrated in healthcare and social assistance, which added 125,000 jobs last month, accounting for the lion’s share of new gigs.

As a result, wages have begun to soften, given the balance of labor demand has tipped in favor of employers. Layoffs in January — up 118% year over year and more than 108,000 — were the most to kick off a year since 2009, according to a Challenger, Gray and Christmas report. It’s a pain if you’re circulating your resume, but analysts said the show of resilience amid tightening could be good for investors:

• “If the recent jitters in the stock market are due to concerns of a weakening labor market and/or economy that is headed toward a recession, this report should alleviate those concerns in the short run,” said Northlight Asset Management chief investment officer Chris Zaccarelli.
• He added: “Until we see significant weakness in the labor market, the economy or corporate profits, we believe this is still a market where dips can be bought.”

The Rate Cut Wait: As for Federal Reserve policymakers, they have wiggle room. “The addition of 130,000 jobs shows the labor market is stabilizing, yet the downward revisions to 2025 confirm growth slowed meaningfully last year,” said Bolvin Wealth Management president Gina Bolvin. “With unemployment still elevated, the Fed has room to stay patient and keep rate cuts on the table.” President Trump, in a social media post, touted January’s “GREAT JOBS NUMBERS,” but given his strong preference that the Fed take a pair of scissors to its benchmark rate he may not be pleased with the consequences: the report “pours cold water on the idea the Fed could cut rates again before mid-year,” said Evercore ISI analysts.