The U.S. labor market rebounded in January as employers expanded payrolls by 130,000 and the unemployment rate edged lower to 4.3%, the Bureau of Labor Statistics said Wednesday in a report delayed by last week’s brief government shutdown. The better-than-expected results suggest that the labor market is stabilizing after months of uncertainty driven by President Trump’s tariff war on trading partners around the world.
At the same time, hiring continues to be concentrated in just a few areas, with healthcare accounting for 60% of January’s net gain as employers in the sector hired about 82,000 workers. Social assistance added 42,000. Employment in construction grew by 33,000, which analysts attributed largely to the ongoing buildout of artificial intelligence infrastructure. Other key sectors saw job losses, including financial services (down 22,000) and federal government (down 34,000). The trade, transportation and utilities sectors shed a combined 9,000 jobs.
Heather Long, chief economist at Navy Federal Credit Union, said in a note that the surprising gains in healthcare and social assistance were enough to stabilize the job market and lower the unemployment rate slightly. “This is still a largely frozen job market, but it is stabilizing,” she wrote. “That’s an encouraging sign to start the year, especially after the hiring recession in 2025.”
In another encouraging sign, the labor force participation rate for prime-age workers (25 to 54) rose to 84.1% in January, the highest since 2001. Hours worked per week edged up by 0.1 hours, and average wage growth over a year’s time came in at 3.7%, beating inflation.
A huge revision for last year: Looking back at 2025, the report includes a significant downward revision to hiring, showing that only 181,000 jobs were added during the whole year, averaging just 15,000 per month. “2025 was a hiring recession,” Long wrote. “We already knew that. Today's data reinforced just how bad it was.”
A final revision to the data covering March 2024 to March 2025 showed that 898,000 fewer jobs were created than initially reported, roughly matching analyst expectations.
On a year-over-year basis, the unemployment rate in January 2026 is higher than in January 2025, and there are more people unemployed (7.4 million in January 2026 vs. 6.9 million in January 2025).
The more downbeat elements of the report suggest to some analysts that the labor market may still be struggling. Economist Samuel Tombs of Pantheon Macroeconomics said hiring remains uneven, with factors like weather playing a potentially outsized role. “We think it is premature to conclude the labor market has decisively turned a corner,” he wrote, per the Associated Press.
Laura Ullrich, director of economic research at Indeed Hiring Lab, also took note of the uneven gains. “It’s great that health care is growing the way it is, but I would feel much better if we were seeing broader strength,” she said, per Bloomberg. “It is quite lopsided growth.”
Moody’s Chief Economist Mark Zandi urged caution. “I wouldn’t exhale with today’s job numbers. The job market remains fragile and highly vulnerable,” he wrote on social media. “Yes, payroll employment increased by 130,000 in January, but given the big downward revisions to history, there has been no job growth since last April (Liberation Day). ... without the job gains in healthcare, the economy would have lost a bunch of jobs. And this is before artificial intelligence has meaningfully impacted productivity growth and thus jobs, which feels dead ahead. So, soak in the January job gains, I suspect there won’t be many more months with job gains like this in 2026.”
Eyeing the Fed: The healthy hiring numbers in January suggest there is little need for the Federal Reserve to move to boost the economy, reducing the likelihood of a rate cut in the next few months. However, that didn’t stop Trump from once again calling for another rate cut.
“GREAT JOBS NUMBERS, FAR GREATER THAN EXPECTED!” Trump wrote on his social media platform. “The United States of America should be paying MUCH LESS on its Borrowings (BONDS!). We are again the strongest Country in the World, and should therefore be paying the LOWEST INTEREST RATE, by far. This would be an INTEREST COST SAVINGS OF AT LEAST ONE TRILLION DOLLARS PER YEAR - BALANCED BUDGET, PLUS. WOW! The Golden Age of America is upon us!!!”
Kevin Hassett, who leads the National Economic Council, told Fox Business Network that there is “plenty of room for the Fed to cut rates.” Speaking to reporters at the White House, he also said that federal employees now represent the lowest share of the U.S. workforce since 1966, a result of the Trump administration’s aggressive effort to slash the size of government.
The bottom line: The labor market bounced back in January, but we’ll need to see more data to conclude that it has returned to a fully healthy state.
