A MARTÍNEZ, HOST:
We're getting some mixed signals about the strength of the U.S. job market.
STEVE INSKEEP, HOST:
Hiring in January was stronger than expected, but it turns out employers added fewer jobs last year than initially reported. So what does that mean for the economy and for people's paychecks in this year that's now beginning?
MARTÍNEZ: NPR's Scott Horsley joins us now. And the data says?
SCOTT HORSLEY, BYLINE: It says employers added 130,000 jobs last month, which is more than double the pace of hiring we saw in either November or December. So that's an encouraging sign that maybe the labor market is finding its footing here at the beginning of 2026, but there are some caveats to that. Last month's hiring was really concentrated in just a handful of industries, especially health care, which tends to be immune to the ups and downs of the broader economy. And economist Sarah House of Wells Fargo says there just aren't as many job openings as there used to be.
SARAH HOUSE: It's still a tough jobs market, if you're unemployed, to break into. But we did see overall the unemployment rate tick down. And importantly, that came even as we saw the labor force increase. So it wasn't because you were having more people just give up on looking for work.
HORSLEY: The overall unemployment rate dipped to 4.3% last month. And we also saw some improvement in the unemployment rates for African Americans and young people, which had spiked above 8% and 9% last year.
MARTÍNEZ: But also, the job market was a lot weaker in 2025 than we first thought.
HORSLEY: Yeah. Once a year, the Labor Department cross-checks its numbers, the numbers from its monthly survey, against more complete but less timely data from business tax records. This is a routine process that happens every year. But this latest revision was a big one, and it wiped out most of the jobs we thought we'd added in 2025. This is kind of a puzzle because, you know, GDP was growing at a pretty healthy clip last year, so why is the economy adding so few jobs? Laura Ullrich, who's with the Indeed Hiring Lab, says, eventually, something's got to give.
LAURA ULLRICH: Either firms are going to look and say, hey, we are still growing quite a bit. We need to hire some more people. Or they're not going to grow as they hope, and they're going to lay people off.
HORSLEY: Now, it's possible over time that artificial intelligence will allow businesses to produce lots more output with a lot fewer workers. But most economists think it's too early to be seeing that kind of effect in the job market just yet.
MARTÍNEZ: All right. Now, what about wages? What's happening with wages?
HORSLEY: They're still going up, although not as fast as they had been. Average wages in January were up 3.7% from a year ago. That's fast enough to outpace inflation. But with this softer job market, workers generally don't have the kind of bargaining power to command much higher wages that they did a few years ago. And because we're no longer adding as many jobs, Wells Fargo's Sarah House says that could limit the overall purchasing power of workers in the economy.
HOUSE: In aggregate, we're just not seeing as much income growth coming from the labor market. And so that has implications in terms of maintaining the recent pace of consumer spending.
HORSLEY: And as we know, consumer spending is the biggest driver of the broader economy. So far, that consumer spending has held up pretty well. But in order to maintain that spending, some workers have had to drain their savings or put it on the credit card.
MARTÍNEZ: All right, that's NPR's Scott Horsley. Scott, thanks a lot.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
