Payrolls Report: Not Hot, Not Cold — Evening Brief – 02.07.25

Nonfarm payrolls for January rose by 143,000, short of the consensus estimate of 168,000 and a substantial decline from the 307,000 jobs added in December, according to the Bureau of Labor Statistics (BLS).

Additionally, the total nonfarm payroll employment for November was revised upward by 49,000, bringing the total to 261,000. The employment data for December was also adjusted upward by 51,000, indicating that, in aggregate, 100,000 more jobs were added than initially reported for these two months. Despite the January figures falling short of expectations, the revisions imply that the labor market remains robust.

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CNBC that he still considered the labor market good and the economy strong. “Ultimately, our job is maximum employment and stable prices. If we see very good data on the inflation front while the labor market stays strong, then I think that would move me towards supporting easing further,” Kashkari said.

Although the Establishment survey showed clear sequential change, the Household survey—which included major population-related changes—standout even more. These changes raised the civilian labor force by 2.2 million, bringing it to 170.744 million; the number of employed workers likewise rose by almost 2.2 million, to 163.895 million.

Consequently, the Household Survey has ultimately aligned with the Establishment Survey, thereby presenting a more coherent and comprehensive depiction of the labor market. This alignment between the two surveys is significant, as it suggests a more consistent and positive trend in employment and labor force participation.

Meanwhile, the unemployment rate slipped to 4.0% in January, down from 4.1% in December and lower than the consensus estimate of 4.1%. The decline occurred as the labor force participation rate increased slightly to 62.6% from 62.5% the prior month. The uptick in labor force participation, combined with the lower unemployment rate, suggests a somewhat healthier labor market, though it also highlights the mixed signals coming from different parts of the data.

The seasonally adjusted nonfarm employment level for March 2024 was revised down by 589,000, or -0.4%. In August 2024, a preliminary adjustment showed a decrease of 818,000 jobs. The revised figures are represented in the table below as presented by the BLS:

Wages showed surprising strength in January, with average hourly earnings rising by 0.5%, stronger than the 0.3% consensus and the 0.3% increase in December. On a year-over-year basis, average hourly earnings increased by 4.1%, surpassing the 3.8% consensus and matching the 4.1% increase from December. Additionally, the prior month’s wage increase was revised upward from the preliminary estimate of +3.9%, according to the Bureau of Labor Statistics.

“Overall, this was a positive report that means the Fed will remain in no hurry to resume its loosening cycle,” Stephen Brown, deputy chief North America economist at Capital Economics, wrote in a note.

The BLS stated that the wildfires in southern California, which began in early January, and the severe winter weather that affected much of the country during the January reference periods had “no discernible effect” on national payroll employment, hours, and earnings from the establishment survey, nor on the national unemployment rate from the household survey.