The January 2026 Employment Report delivered another upside surprise, showing stronger-than-expected job growth, a dip in unemployment, and continued wage momentum. While hiring remains uneven across sectors, the overall picture suggests a labor market that continues to show resilience entering the new year.
Key Insights:
The U.S. economy added 130,000 jobs in January, roughly double expectations. Private sector hiring drove the gain, with 172,000 private payrolls added, well above forecasts.
Job growth was uneven across industries. Education and Health Services accounted for the majority of gains, adding 137,000 jobs, with Health Services alone contributing 124,000. This concentration highlights continued demand in healthcare-related roles, while hiring elsewhere remained more muted.
By contrast, government employment declined by 42,000 jobs, the largest loss among major sectors. Manufacturing posted a modest gain, marking its first increase since November 2024 and suggesting early signs of stabilization.
Revisions to prior months were limited, with November and December hiring revised down by a combined 17,000 jobs, leaving the broader hiring trend largely unchanged.
The unemployment rate declined unexpectedly to 4.3%, beating expectations that it would hold steady at 4.4%.
Notably, this decline occurred even as more workers entered the labor force. The labor force participation rate increased by 0.1 percentage points, suggesting that job growth is keeping pace with new entrants rather than being driven by workers exiting the labor market.
Earnings data also came in stronger than anticipated. Average hourly earnings rose 0.4% in January, exceeding expectations by 0.1 percentage point. Wages for nonsupervisory employees matched that pace, also rising 0.4% for the month.
On a year-over-year basis, average hourly earnings increased 3.7%, in line with forecasts, while nonsupervisory employee earnings rose slightly faster at 3.8%.
January’s report reinforces a familiar theme: the labor market is cooling gradually, not cracking. Hiring continues but is increasingly concentrated in select sectors. Wage growth remains elevated enough to matter for workforce planning, even as it shows signs of stabilization.
For employers, this environment rewards clarity in workforce strategy, compensation planning, and talent investment, as competition for skilled labor remains present though more targeted than in previous years.
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