Labor Market and Economy Report: A Look at Trends in January 2025

Executive Summary

Job Growth

In January, the U.S. economy added 143,000 new jobs, which fell short of economists’ expectations of 170,000 to 175,000 jobs. Still, the unemployment rate declined to 4%, and the last two months’ employment gains were revised upward by a total of 100,000, indicating that the labor market remains relatively stable. The following industries experienced some notable gains: healthcare (+43,700), retail trade (+34,300), government (+32,000) and social assistance (+22,300).

Unemployment and Labor Force Participation

Between December 2024 and January 2025, the unemployment rate decreased slightly from 4.1% to 4%. The unemployment rate remains historically low compared to the median rate of 5% observed over the last 20 years.

The labor force participation rate (LFPR) was 62.6% in January. The LFPR, or the percentage of the population who is working or looking for work, has yet to recover to its pre-pandemic rate of 63.3%.

Unemployment rates specific to the industries Aston Carter supports were as follows for January: finance and insurance (2%); professional and business services (4.2%); hospitals (1.7%); utilities (1.2%); manufacturing (3.6%), and construction (5.4%).

Among skilled labor categories Aston Carter sources talent for, unemployment in business and financial was 2.5% and office and administrative was 3.6%.

Inflation

Looking back at the 12 months ending in January, the consumer price index, a measure of inflation, increased by 3%, which was just above December's reading of 2.9%. Reflecting on the fourth consecutive increase, it may be a sign that inflation is moving further away from the Federal Reserve’s 2% target. Many companies have experienced higher materials costs and operating costs due to higher inflation. The combination of higher-for-longer inflation and interest rates may contribute to slower hiring activity for many companies in the near term.

Wage Growth

Looking back at the 12 months ending in January, the average hourly earnings increased by 4.1%, which has remained relatively unchanged for the last three months. “Real” average hourly earnings (wages adjusted for inflation) increased by 1% between January 2024 and January 2025. This suggests that even though average hourly earnings have increased 4.1% year-over-year, workers may only feel as though they’re making about 1% more because of inflation.