January adds 143,000 jobs to the economy, labor market trends cooler: CEI analysis

The Bureau of Labor Statistics’ jobs numbers for January showed 143,000 jobs were added to the economy last month and the unemployment rate edged down slightly to 4.0 percent. With the economy nearing full employment and wages on the rise, employers are cooling their search for new employees.

CEI Research Fellow Sean Higgins:

“The nation’s modest job gains of 143,000 in January were enough to drop the official unemployment rate back down to 4.0 percent, but it is still below 2024’s average monthly gains of 166,000.  The labor market no longer favors workers like it did just two years ago. Employers are instead making do with smaller staff and more automation. This is in part because the cost of labor continues to rise. Wages rose by 17 cents an hour in January and are up 4.1 percent over the last year, outpacing inflation. Rapidly rising minimum wages in several states are creating a drag on job creation.

“The Labor Department’s number should nevertheless be taken with a grain of salt. The department also revised November and December’s job gains upwards by a combined 100,000. Such revisions have become habitual by the department, which is struggling to keep track of the changes to the job market and the broader economy. Anyone looking at this month’s numbers should understand that they may be substantially revised in the near future.”

CEI Senior Economist Ryan Young:

“January’s low jobs numbers has more to do with a change in methodology than a change in the real world. The Bureau of Labor Statistics does this every year to account for population changes. As it says in its release, ‘The number of unemployed people, at 6.8 million, changed little over the month.’ The labor market remains in good shape, though with room for improvement as always.

“With the economy basically at full employment, there isn’t room for gangbusters employment growth. Economists used to consider any unemployment reading under 5 percent to be full employment, until the last several years have shown that sustained 4 percent unemployment is possible. January’s reading, at exactly 4 percent, continues the trend.

“Rising wages—which are a good thing—are another sign that the economy is near full employment. Look for jobs growth to roughly track population growth until policies like trade wars or other interventions put a dent in the economy.”