Article • Data Bytes
January 2025 Jobs Preview: What to Expect in the January Jobs Report

Article • Data Bytes
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We should see another solid jobs report in January. The unemployment rate has been remarkably stable the last six months, fluctuating between 4.1 percent and 4.2 percent. There is no reason to believe that January’s number will move outside that range.
The 256,000 jobs number for December was higher than most analysts had expected. It is likely to be considerably lower in January, probably close to 150,000. Part of this will be simple auto-correlation (if companies hired a lot of workers in December, they won’t be hiring in January), and part is also that it is not plausible that the economy is generating over 3 million jobs a year. We may also see some impact from the Los Angeles fires, which destroyed many businesses and impeded hiring in ones that were closed.
We will also be seeing the effect of the slowdown in immigration that began in June. This is in addition to the effect of whatever deportations we may see from the Trump administration.
The January report is the last one that will reflect data exclusively from President Biden’s term. The reference period for both surveys is almost entirely within Biden’s term, so it would not be directly affected by anything that took place after the 20th.
On the jobs side, we will have generated almost 16 million jobs during his term. This is even after deducting the benchmark adjustment, which will be incorporated in the January data, subtracting more than 800,000 jobs from the currently reported number.
Even if we start from February 2020 – which would in effect include both the pandemic job plunge and subsequent bounce back – the economy will have created close to 7 million jobs. Just before the pandemic, the Congressional Budget Office had projected the economy would create just 2.4 million jobs during this period. It is important to remember that the rapid pandemic jobs rebound had slowed by the time Biden took office. Job growth over the last three months of the Trump administration averaged just 131,000.
The labor market was also a great success from the standpoint of unemployment, with the rate averaging 4.1 percent – the lowest rate for any president since Johnson’s last term in office. The employment-to-population ratio for prime age workers (ages 25 to 54) hit its highest level in more than two decades, and for women it reached an all-time high.
There was also healthy real wage growth in spite of the disruptions caused by the pandemic. The average real hourly wage for all workers was 1.8 percent higher in December than it had been before the pandemic. However, lower paid workers saw much larger pay gains, with the real hourly wage for non-supervisory workers in hotels and restaurants rising 8.3 percent. (The smaller wage gains for higher paid workers were supplemented by a huge increase in the opportunity to work from home.)
The slowdown in immigration that started last summer seems to already be affecting the labor market. The year-over-year gain in employment for immigrants was just 342,000 in December, the lowest year-over-year gain since March of 2021. (These data are not seasonally adjusted, so it is necessary to compare to year ago levels to get a meaningful figure.) We may also see some effect of Trump’s stated policy showing up in the January data, as some immigrants may have already left their jobs, or at least take actions that prevent them from showing up in the surveys. On the establishment side, the loss of immigrant workers may show up in weaker construction employment, as well as employment in the food processing industry.
As is typical in January, we will see new population controls incorporated into the household survey. This is likely to raise total employment and reduce some of the gap between the establishment and household survey. However, it also will make it more difficult to make comparisons with data from a year ago.
The average hourly wage has been rising at roughly a 4.0 percent annual rate over most of the last year and a half with no clear trend. This is about 0.6 percentage points faster than in the last two years before the pandemic. This more rapid pace of wage growth can be sustained and still be consistent with the Fed’s 2.0 percent inflation target if productivity growth remains close to 2.0 percent.
It is also important to remember that there was a shift from wages to profits of roughly 2.0 percent of output. This means for a period of time real wages can rise by more than productivity and not lead to higher inflation if it comes at the expense of profit shares.
Health care has consistently been the most rapidly growing sector of the economy, adding an average of more than 50,000 jobs a month over the last year. State and local governments have also been big job gainers, adding an average of more than 30,000 jobs a month. We should see strong gains in both in January, likely accounting for close to half the job growth.
Manufacturing employment has been trending downward over the last year, with the sector losing 7,000 jobs a month. Manufacturing employment is likely to be weak if not actually negative in January. Construction employment has also lagged during the last few months, with the sector adding just 5,000 jobs a month since September. It had been adding almost 20,000 a month over the prior year.
The slower job growth in these highly cyclical sectors is worth watching, but not close to what we would see in a typical recession, where they would be losing tens of thousands of jobs a month.
Through the summer and fall the percentage of unemployment due to voluntary quits had been unusually low given the other data indicating a strong labor market. That changed in December when a 1.8 percentage point jump brought the share to 13.8 percent, which is roughly what we would expect with a 4.1 percent unemployment rate.
We do know from the JOLTS data that quits are still unusually low. This could be because workers are concerned about their job prospects, or it could be because they are relatively satisfied with their jobs after the massive wave of job shifting in 2021-2023.
All signs suggest that the labor market Biden is handing off is the most solid one at least since Bush II, and arguably since Nixon took office in 1969. However, much may change in the months ahead.