The ‘experts’ were wrong again: January’s jobs report exceeded expectations and all figures exceeded forecasts.
Payrolls rose by as much as 130,000, almost double what the economy needs to cover population growth. In fact, the working population grew by almost 400,000 as more people decided to look for work and the number of people who said they were employed rose by more than half a million. That was enough to reduce the unemployment rate to 4.3%.
There was more good news about the work week. Hours worked have increased, predicting future hiring. It is also a result of people trading multiple part-time jobs for better-paid full-time work. Sure enough, we saw a drop of 450,000 part-timers unable to find full-time work, while the feared U-6 employment shortage (which even includes people who have given up on finding a job altogether) has fallen by 600,000 people.
Even production rose, hopefully bucking a trend that started three years ago, in the middle of the Biden administration. The construction sector rose by 33,000 last month, driven by factory development. This trend could continue as factory construction increases under President Donald Trump.
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Construction jobs rose in the January jobs report, part of big growth in the private sector. (iStock)
One of the biggest gains was average hourly wages, which grew 5% year over year. That’s almost double the official inflation rate – according to Truflation’s current figures, it’s actually six times the inflation rate.
That’s in stark contrast to the Biden years, when prices outpaced wage growth. Under President Joe Biden, the average American’s weekly salary, adjusted for inflation, even fell by 4%. Trump earned half of that in his first year alone.
Previous economic data pointed to a lot of weakness in the labor market, at least on paper, due to factors like deportations and federal government layoffs — which are counted as jobs. There are also Biden’s zombie minions — private companies that got government-backed loans for projects that would never become economically viable or profitable — going bankrupt, and slower federal spending compared to Biden’s spending orgy. Meanwhile, the factors that boost employment, like Federal Reserve rate cuts and trillions of dollars in new factories, all take time.
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This feature report says we’re moving from pain to gain. The private sector added a whopping 172,000 jobs, while the government shrank by 42,000. You have to go all the way back to 1966 – an incredible sixty years ago – to find a time when the federal bureaucracy was smaller than it is today.
That doesn’t mean it’s all rosy. There was a long-awaited massive downward revision of almost 900,000 jobs by the infamous Bureau of Labor Statistics, covering the twelve-month period ending March 2025, so that’s Biden’s last ten months and Trump’s first two months. It turns out that during Biden’s last year, job growth was overestimated by more than a million fake jobs.
The culprit is the BLS’s so-called birth-death models of business formation, which use data from the COVID-19 era explosion of millions of fake companies set up to steal federal money they were handing out like candy from Somali-run businesses. ‘Quality learning center’ down.
The other concern is AI. For a year, we’ve been warning of a two-speed labor market, where blue-collar jobs grow through deportations and investments in new factories, but white-collar work, especially at entry levels, is squeezed as AI moves closer to replacing white-collar jobs in finance, consulting, IT, journalism and more.
In fact, the financial sector lost 22,000 jobs in January – almost 50,000 fewer since May last year. IT remained roughly flat this month, but fell by 90,000 since the post-Covid peak. Journalists lost 12,000 last month – a drop of 300,000 since the post-Covid peak.
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There was more good news about the work week. Hours worked have increased, predicting future hiring. It is also a result of people trading multiple part-time jobs for better-paid full-time work.
Meanwhile, construction rose by 33,000 last month, thanks to factory construction. The manufacturing sector added 5,000 and will hopefully gain momentum in the coming months and years as those factories are completed and hire workers to make products.
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This kind of Robin Hood job market is a welcome respite from four decades of worker carnage, as bad trade deals and automation laid off manufacturing workers.
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But since most American jobs are white-collar, millions of people are at risk, if only in the short term. Technology improvements always ultimately create more jobs in new industries than they eliminate, but the losses are the first to emerge, and AI-induced layoffs should become apparent later this year.
Overall, the labor market is improving, and this should accelerate with factory resets, investment and Fed rate cuts. The question becomes: can the onshoring and interest rate cuts absorb the AI-displaced workers? If not, then we need more from Congress—particularly reducing the tax burden and red tape on small businesses that employ 62 million Americans—half the population—and could employ tens of millions more if the bureaucrats do their job.
EJ Antoni, Ph.D., is chief economist and Richard F. Aster fellow at the Heritage Foundation and senior fellow at Unleash Prosperity.
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