The US economy added 130,000 jobs in January, well above economists’ expectations, while the unemployment rate fell to 4.3%, signaling a labor market that is stabilizing after a sluggish 2025.
The Bureau of Labor Statistics said nonfarm payrolls rose 130,000 last month, doubling the Bloomberg consensus forecast of 65,000. Private payrolls jumped 172,000, far exceeding estimates of 68,000, with gains concentrated in healthcare, social assistance, and construction. Manufacturing added 5,000 jobs, reversing expectations for a decline.
The jobless rate declined slightly from 4.4% to 4.3%, while the labor force participation rate edged up to 62.5%. Underemployment fell to 8% from 8.4%, and average hourly earnings increased 0.4% month-over-month, above the 0.3% forecast.
Analysts described the report as broadly encouraging but emphasized lingering challenges in the labor market.
“The labor market is far from perfect, with hiring still concentrated in a handful of industries and certain demographics enduring elevated unemployment,” Wells Fargo economists wrote. “That said, it appears closer to stabilization than rapid deterioration, which will embolden the hawks on the Federal Reserve to maintain the current policy stance.”
Gina Bolvin, president of Bolvin Wealth Management Group, said the data showed stabilization but noted slower growth last year. “The addition of 130,000 jobs confirms the labor market is stabilizing, yet the downward revisions to 2025 highlight that growth slowed meaningfully last year. The Fed still has room to be patient and keep rate cuts on the table,” she noted.
Jeffrey Roach, Chief Economist at LPL Financial, highlighted that employers may be increasing hours rather than adding headcount. “Average workweek edged higher for all private employees, suggesting that in sectors like construction, employers are adding hours to existing workers rather than hiring more staff,” he said.
Kathleen Brooks, research director at XTB, noted the unusual nature of the report, which included substantial revisions for 2025. “While 2025 saw virtually no jobs growth, the US labor market is showing signs of gaining momentum as we move into 2026,” she said, noting the three-month average payroll gain is 73,000, up from 17,000 in December.
The stronger-than-expected report initially boosted US Treasury yields, with the two-year yield rising over six basis points.
Market expectations for Federal Reserve rate cuts have shifted in light of the report. Analysts now see fewer cuts this year, with the first potential reduction in July rather than June.
“This report likely puts to bed hopes for a third rate cut this year, reinforcing a more patient approach by the Fed,” Brooks added.