The January jobs report will both give us important information about where the economy is going, but also where it has been. The report will include new population controls in the household survey, based on data from the Census Bureau. We know these will show a far lower population than had been estimated based on the 2025 population controls as a result of sharply lower immigration.

The report will also incorporate the benchmark revisions to the establishment survey based on data from the Quarterly Census of Employment and Wages. The revision is to March 2025 but will also affect the growth reported in subsequent months. The preliminary estimate of the revision reported in September was -911,000 jobs. The final revision reported with the January data is likely to be somewhat smaller but may still wipe out most of the job growth reported for 2025.

In terms of the current state of the labor market, we will likely see the unemployment rate remain at its current 4.4 percent level. Job growth has been very weak since April, and should again be weak in January, although the seasonal adjustment may provide a modest boost. The weather was relatively mild for the month through the reference week. If there is a weather effect from the recent storms it will show up in the February data.

Unemployment Remaining Steady at 4.4 Percent

Recent data, such as weekly unemployment claims and the Indeed Jobs Postings Index, suggest that there may have been a slight upturn in the job market in recent weeks. To be clear, this is only compared to the weak numbers reported in the fall. The Indeed index is still 5.9 percent below its year-ago level. While 4.4 percent is a relatively low unemployment rate by historical standards, it is 0.3 percentage points (p.p.) above the year-ago level and a full percentage point above the recovery low of 3.4 percent hit in April of 2023.

Unemployment Rates for Black Workers and Young People Remain High

Although the overall unemployment rate has not risen much over the last year, the weaker labor market has been a big hit to disadvantaged workers. The unemployment rate for Black workers was 7.5 percent in December, up from 6.1 percent a year earlier and a low of 4.8 percent in April of 2023. It likely will edge higher in January. The sharp divergence in the unemployment rate for Black workers and white workers over the last year (the rate for whites has risen just 0.2 p.p.) is striking.

The unemployment rate for workers between the ages of 20-24 was 8.2 percent in December. That is 0.7 p.p. above the year-ago level and 2.7 p.p. above the 5.5 percent recovery low.

Involuntary Part-Time Remains Elevated as Does Long-Term Unemployment

In November, there was a large jump in the number of people who reported working part-time because they could not find full-time work. While this fell back somewhat in December, the figure was still almost 900,000 higher than the year-ago level. The number of involuntary part-time workers is likely to remain elevated in January.

There was also a jump in the share of unemployed workers who had been without a job for more than 26 weeks. It rose to 26.0 percent, the highest since February of 2022. This share may rise somewhat further in the January report.

Share of Unemployment Due to Quits Remains Low and Multiple Jobholders Stays High

Two other indicators of labor market weakness are an unusually low share of job leavers among the unemployed and an unusually higher share of workers holding more than one job. The former was at 11.2 percent in December. It averaged 13.2 percent in the strong 2018-19 labor market. The share of multiple jobholders hit a high for this century in November and remained sharply elevated in December.

Employment of Native-Born Workers Will Plunge with New Population Controls

There will be a sharp drop, likely close to 1.8 million, in the number of employed native-born workers reported for January. These data are not seasonally adjusted, so the month-over- month change has limited meaning. The year-over-year data will show far lower growth than the 2,040,000 figure in the December data.

The serious issue here, rather than the levels, is the unemployment rate. The December rate for native-born workers was 4.1 percent, 0.4 p.p. above the year ago level.

Job Growth Will Be Small But Positive

We will continue to see the pattern of very slow job growth we have seen since April, with the number likely coming in around 40,000. This is roughly the average rate of growth over the last eight months, excluding the loss of 234,000 jobs in the federal government.

With immigration falling near zero, or possibly even negative, this rate of job growth may be sufficient to absorb the growth of the native-born labor force. However, the picture will look considerably different after benchmark revisions are incorporated into the data.

Healthcare Likely to Still Dominate Job Growth

The healthcare sector added 306,000 jobs since April, more than the economy as a whole. It is likely to add more than 30,000 jobs in January, again accounting for the bulk of job growth. The other sectors that have been consistent job gainers are local governments —which have added an average of 1w2,000 jobs a month since April — and restaurants, which have added an average of 20,000 jobs a month.

Manufacturing Still Shedding Jobs

Manufacturing has been losing jobs since February of 2023. The data currently show a loss of 68,000 manufacturing jobs over the last year, but the benchmark revision is likely to add at least 100,000 to this job loss. That would put manufacturing at under 7.9 percent of total employment, the lowest share ever recorded in these data.

Construction has also been weak, with employment unchanged since April. Reported employment in the sector will likely also drop as a result of the benchmark revision.

Wage Growth Edging Lower

Wage growth had averaged over 4.0 percent in 2023 and 2024. It has slowed to 3.7-3.8 percent this year. With many signs of weakness in the labor market such as low quit rates, higher involuntary part-time employment, and the growth in long-term unemployment, it is likely that it will continue to edge lower. The current pace is still beating inflation, but the wages for many workers clearly are not. And unlike the earlier period of the recovery, wage growth at the bottom of the distribution is no longer outpacing the average.

Overall Picture: Gradual Weakening of the Labor Market

The story in January is likely to be more of the same in that we are looking at a labor market that is gradually becoming less favorable to workers. It is not a collapse and not currently moving towards a recession, but the strong labor market from the early days of the pandemic recovery is behind us.