United States: 2025 Begins with Slower Job Growth

Hiring slowed in January and came in slightly below consensus expectations. However, this month’s print was fairly in line with our own forecast, with some predictable pullbacks after December’s release, severe weather and the wildfires in California all pointing to weaker job creation. That said, 143,000 jobs added is still a decent print and similar to the average monthly gain of 166,000 in 2024.

Although the revision of previous data appears quite negative, it isn’t disastrous. In fact, the downward revisions to employment mainly impacted the previous year, 2023, when job creation was 419,000 lower. Total nonfarm employment at the end of 2024 was revised down by 610,000 compared to December’s number.

Looking at January’s figures, we’re seeing fewer hires, but no major net decreases. In all, 55.0% of the 250 sectors surveyed reported an increase in payrolls, compared to 57.2% the previous month. Within the manufacturing sector, motor vehicles and parts and computer and electronic product manufacturing saw their payrolls decline. We also saw net layoffs in communication services, temporary help services and food services and drinking places. However, retailers—especially in warehouse-type general merchandise stores—had another month of decent job gains.

In an environment where multiple sources of uncertainty could have tested its resilience, the labour market is holding up fairly well despite weaker hiring in January. Wage growth is also evidence of its strength. However, there are myriad obstacles that could affect jobs in 2025. Higher tariffs on Chinese products, the possibility of a much more protectionist trade policy toward Canada, Mexico and the rest of the world, as well as government upheaval, could all impact the US labour market in the coming months and quarters.

Given the political turmoil of recent weeks, January’s jobs print may quickly become old news. Although the US economy remains strong, we’ll have to wait and see how it contends with the new Trump administration’s current and future policies. In the meantime, the steady pace of hiring and wage growth support the Federal Reserve’s decision to pause the monetary easing initiated last year.