Unemployment Slips to 4.3% as January Hiring Throws Cold Water on Recession Chatter

U.S. job growth came in stronger than expected to start 2026, offering a measure of relief after a year defined by weak hiring and growing concerns that the labor market was losing momentum.

Nonfarm payrolls rose by 130,000 in January, according to seasonally adjusted data released by the Bureau of Labor Statistics. Economists surveyed by Dow Jones had been looking for just 55,000. The gain also marked a step up from December’s revised increase of 48,000.

Unemployment eased to 4.3%, slightly lower than December’s 4.4%. Another gauge that counts those who have stopped looking for work or are working part time because they can’t find full-time roles declined to 8%, a 0.4-point drop from the prior month. The household survey reflected a 528,000 jump in employment, and participation moved up to 62.5%.

Markets reacted positively to the report. Stock futures moved higher following the release, and Treasury yields climbed as investors reassessed expectations for economic growth and Federal Reserve policy.

Job gains remained concentrated in a handful of sectors. Health care led hiring, adding 82,000 positions. Social assistance followed with a 42,000 increase, and construction added 33,000 jobs after a relatively subdued year. Together, those areas accounted for most of the net job creation in January.

Other parts of the economy were weaker. Federal government employment declined by 34,000, reflecting the impact of earlier workforce reductions and deferred resignations rolling off payroll counts. Financial activities employment fell by 22,000.

Wage growth was steady. Average hourly earnings increased 0.4% for the month and were up 3.7% from a year earlier, roughly in line with expectations. The pace suggests income growth remains supportive of consumer spending without pointing to a renewed acceleration in inflation pressures.

The report also included final benchmark revisions for April 2024 through March 2025. Payroll levels for that period were revised lower by 898,000 on a seasonally adjusted basis. While close to Wall Street expectations and slightly smaller than the 911,000 preliminary estimate released last September, the revision underscores how soft the labor market was through much of 2025, when job growth averaged just 15,000 per month.

January’s gain was the strongest since December 2024 and comes after a year in which every month saw negative revisions. The data suggest the labor market remains in a low-growth mode but may be stabilizing, with hiring modest but layoffs not accelerating meaningfully.

President Donald Trump quickly praised the report, calling the numbers “far greater than expected” in a post on Truth Social and renewing his call for the Federal Reserve to lower interest rates. He argued that strong economic performance should translate into lower borrowing costs for the United States.

For policymakers, the data likely reinforces a cautious stance. The report eases fears of a sharp slowdown but does not point to overheating. Futures traders increased bets that the Fed will hold rates steady at its March meeting, with market expectations still leaning toward a potential cut later in the year, according to CME Group’s FedWatch gauge.

Overall, January’s jobs report points to a labor market that is not surging, but also not slipping. After a prolonged stretch of weak momentum, the latest data offer a sign that conditions may be steadying as this new year gets underway.

At the time of publishing this article, Stocks.News doesn’t hold positions in companies mentioned in the article.