The U.S. labor market is showing clear signs of exhaustion, with January 2025 payrolls adding just 143K jobs, a significant drop from December’s 307K. While healthcare (+44K), retail (+34K), and social assistance (+22K) contributed to job growth, private-sector hiring slowed significantly, indicating weakened demand for labor. Government hiring (+32K) remained steady, but overall employment trends point to a broader economic slowdown.
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Even more concerning, annual benchmark revisions revealed that 2024 payroll growth was lower than previously reported, with an average of 166K jobs per month, down from 186K. The revised data suggests that employment growth has been overstated, raising questions about the labor market’s true strength. Slowing job creation often precedes economic downturns, as declining hiring reduces consumer spending—one of the primary drivers of GDP growth.

Wages Rise, Reigniting Inflation Concerns

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Wages rose more than expected: Average hourly earnings increased 0.5% for the month and 4.1% from a year ago, compared with respective estimates for 0.3% and 3.7%. The data changed sentiment on Wall Street late last week, causing a reversal of the market from positive to negative territory as investors embraced the reality that interest rates are not likely to continue falling and support economic expansion.

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