Total nonfarm payroll employment rose by 143,000 in January, and the unemployment rate edged down to 4.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.
The economy added just 143,000 new jobs in January as massive California wildfires and a cold snap in much of the country acted as a drag on hiring. The details of the employment report point to a robust labor market that gained strength at the end of 2024. The economy averaged 233,000 new jobs from November to January, well above the 180,000
One economist determined that most of the new jobs were in the service sector, as I’ve been reporting, hence favored immigrants who tend to fill the lowest paying jobs that native Americans don’t want.
But it’s not just more wildfires we will have to worry about this year as world temperatures rise, but more hurricanes and floods, such as hit the east coast.
So what does that mean for 2025? It depends on what tariffs are enacted, what the Federal Reserve does with interest rates, and how many immigrants are deported, for starters. Then we still must worry about the effects of continuing wars and more climate disasters.
It would be nice if consumers continued to shop, in spite of what’s happening, which means they remain somewhat optimistic about their future.
However, the latest University of Michigan sentiment survey was a downer. Its gauge of consumer sentiment fell to 67.8 in a preliminary February reading, down from 71.1 in the prior month and the lowest reading since July.
Inflation was still their biggest worry. Americans’ expectations for overall inflation over the next year jumped to 4.3% in February from 3.3% in the prior month, according to the survey. That’s the highest level since November 2023, and it is only the fifth time in 14 years that there has been a one-month gain of that size.
It’s really how American consumers react that determines economic growth and hence the job market. The Los Angeles fires were one reason the January nonfarm payroll total was low. The recent hurricanes also punched another hole in employment. Forbes Magazine reported last October that Hurricane Helene was expected to cause a reduction of 40,000 to 50,000 payroll jobs with Hurricane Milton adding to the total.
And I won’t even try to predict when the Gaza and Ukraine conflicts will be resolved, or what it might do to the world economy with energy prices soaring.
The bottom line seems to be that the U.S. economy is escaping much of the damage because the Fed has been proactive over the inflation danger, and has been saying it wants to lower interest rates further to support the job market.
President Biden’s massive new, New Deal investments with the infrastructure, CHIPS, climate change, and healthcare legislation will be benefiting U.S. economic growth for years to come.
Economists are also estimating that the 3 million new immigrants added to the workforce over the past two years has made such growth possible. Will that continue if our worker shortage worsens?
“The flood of fresh labor eased a worker shortage after the pandemic and allowed the economy to add more jobs without driving up wages and inflation. Normally, rapid job creation tends to exacerbate inflation,” says MarketWatch’s Jeffry Bartash.
Did the influx of new immigrants hurt American workers? Economist Wendy Edelberg, director of the Hamilton Project at the Brookings Institution, estimates the labor force is about 172.6 million strong, instead of a reported 169.6 million at the end of 2024. Edelberg said the newly revised figures should show employment for native-born workers also rose in 2024.
So what are consumers to do? It is really too early to know what the 2025 job market will look like.
Harlan Green © 2025
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