The number of jobs created in January was less than expected as employers hired a seasonally adjusted total of 143,000 people for the month. Still, unemployment rate decreased slightly to 4%, according to the Bureau of Labor Statistics (BLS) on Friday.
Job growth was below the monthly average gain of 166,000 in 2024 and way below December’s upwardly revised total of 307,000 jobs. But overall job growth, including upward revisions to past monthly totals, and a falling unemployment rate, pointed to a relatively healthy job market.
The largest job gains were seen in health care, which increased by 44,000, followed by retail (34,000) and government (32,000). Social assistance added 22,000 jobs and mining-related industries lost 8,000 jobs.
Average hourly earnings rose 0.5% for the month and 4.1% for the year, keeping wage growth ahead of expected inflation levels.
Mike Fratantoni, chief economist and senior vice president of the Mortgage Bankers Association (MBA), said that at first glance, the jobs data indicated a reasonably strong jobs market, noting that job growth over the past three months has averaged 237,000, a level that is likely not sustainable this year.
“However, there are several factors working to cloud the picture,” Fratantoni said in a statement. “First, there were substantial revisions to prior payroll data, with job growth from the most recent months revised higher, but the annual benchmark process showing slower job growth for 2024. Second, the household survey was adjusted in January to recognize the impact of substantial international immigration in recent years, adding 2.9 million people to the population count as of January.”
Other sources of uncertainty were the California wildfires and winter weather events across the country. Fratantoni expects this new round of economic news will add to the Federal Reserve’s reluctance to lower interest rates in 2025.
“With all the caveats, these job market data are likely to keep the Fed on hold with respect to any further rate cuts,” he said. “With inflation still above target, and no appreciable signs of weakening in the job market, MBA’s forecast is that the Fed will make, at most, one more cut this cycle.”
First American Senior Economist Sam Williamson agreed that the strong jobs report means the Fed will refrain from interest rate cuts for the time being until there are more signs of reductions in inflation or weakness in the jobs market. He said the Fed is likely to “keep rate cuts off the table” until possibly May or June.
“Borrowing costs, including mortgage rates, are likely to stay elevated for an extended period, reducing the potential for a strong housing market rebound in the spring,” Williamson said. “Overall, mortgage rates are expected to drift modestly lower to the mid-to-low 6% range by year-end, though unexpected labor market or economic downturns could cause rates to fall more quickly.”
