US job growth surges in January; unemployment rate drops to 4.3%

By Lucia Mutikani

WASHINGTON, Feb 11 (Reuters) - U.S. job growth unexpectedly accelerated in January and the unemployment rate fell to 4.3%, signs of labor market stability that could give the Federal Reserve room to keep interest rates unchanged for some time while policymakers monitor inflation.

But the largest increase in payrolls in 13 months reported by the Labor Department on Wednesday likely exaggerates the labor market's health, as revisions showed the economy added only 181,000 jobs in 2025 instead of the previously estimated ?584,000. The job tally is a fraction of the 1.459 million added in 2024, the final ?full year of former President Joe Biden's term.?

President Donald Trump's aggressive trade and immigration policies continued to cast a shadow on the labor market, economists said, cautioning against viewing the surge in payrolls in January as marking a material ?shift in conditions.?

They noted that other indicators, including job openings, pointed to a tepid labor market, adding that job growth remained concentrated in the healthcare and ?social services sectors.?

"The only jobs being filled in January are in health care and social assistance, along with some nonresidential specialty ?trade contractors probably related to AI facilities, ?all of which do not guarantee the economy's future success," said Christopher Rupkey, chief economist at FWDBONDS. "If you are looking for a job ... you are unlikely to find anything to apply for in today's report."?

Nonfarm payrolls increased ?by 130,000 jobs last month after a downwardly revised 48,000 rise in December, the Labor ?Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls advancing by 70,000 jobs. Estimates ranged from a loss of 10,000 jobs to a gain of 135,000 positions. The unemployment rate fell from 4.4% in December.

The employment report, initially due last Friday, was ?delayed by the three-day shutdown of the federal government.

Healthcare employment increased by 82,000 jobs, ?spread across ambulatory healthcare ?services, hospitals, nursing and residential care facilities. The job gains were well above the??monthly average of 33,000 in 2025, leading some economists to conclude that January's increase was a fluke.

Social assistance payrolls increased 42,000 positions.?

Construction added 33,000 jobs, driven by hiring of nonresidential specialty trade contractors, attributed by some ?economists to data centers needed to power artificial intelligence. Construction was virtually flat in 2025.?

Professional and business services payrolls increased 34,000. Manufacturing employment rebounded slightly as ?did retail payrolls. But the financial sector shed another 22,000 jobs. Federal government employment contracted by an additional 34,000 positions as some federal employees who accepted a deferred resignation offer in 2025 came off federal payrolls.?

Federal government employment is down by 327,000 since peaking in October 2024. The share of industries reporting growth increased to 55.0% from 54.2% in December.

BENCHMARK REVISIONS HIGHLIGHT LABOR MARKET WEAKNESS

Annual payrolls benchmark revisions showed 862,000 fewer jobs were created in the 12 months through March 2025 than previously estimated. Effective with the January report, ?the BLS updated ?the birth-and-death model by incorporating current sample information each month.?

This model, which is a method the BLS uses to try ?to estimate how many jobs were gained or lost because of companies opening or closing in a given month, has been blamed for an overcounting of payrolls.

The update to the ?birth-and-death model, which follows the same methodology applied to the April-October 2024 estimates after the annual benchmark payrolls revision, could result in as many as 50,000 fewer jobs added to payroll growth than in recent months, economists estimated.?

Financial markets lowered bets on rate cuts this year on the data. U.S. stocks opened higher as investors cheered the jump in payrolls.. The dollar gained versus a basket of currencies. U.S. Treasury yields rose.

?The U.S. central bank last month left its benchmark overnight interest rate in the 3.50%-3.75% range. White House economic adviser Kevin Hassett on Monday warned of lower job gains in the months ahead because of slower labor force?growth.

The Census Bureau last week said the nation's population increased by just 1.8 million people, or 0.5%, to 341.8 million ?in the year ending June 2025.?

Trump made cracking down on U.S. immigration a cornerstone of his election campaign.?The BLS will next month introduce new annual population controls for the household survey with February's employment report after they were delayed by last year's 43-day government shutdown. These adjust for updated population estimates, including migration.?

The unemployment rate is derived from the ?household survey.?

Given the reduction in the labor force, economists believe the economy ?needs to create about 50,000 jobs per month or even less to keep up with growth in the working-age population.

(Reporting ?by Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)