I concluded in last month’s column that the consumer, who represents 70 percent of GDP, is on a spending tear, despite the cost of tariffs and the ubiquitous “affordability” issue we keep reading about. I commented that even the softening job market was not a downdraft on consumer spending and the overall strength of the economy, and offered up this take: “Curiously, the job market also looks a lot weaker than the overall economy … Still, the unemployment rate remains low at 4.4 percent, suggesting a no-hire, no-fire labor market with companies hesitant to bring on new employees but reluctant to let go of the ones they have.”
Well, even the job market has now shown a strong recovery in the first month of the year. Our friends at the National Association of Home Builders took the most recent data and parsed it, and what they report is eye-opening.
The U.S. labor market began 2026 at a surprisingly strong pace, while newly released benchmark revisions show that job growth in 2025 was considerably weaker than previously reported. Nonfarm payrolls increased by 130,000 jobs in January, and the unemployment rate edged down to 4.3 percent. January’s job gains were concentrated in health care, social assistance, and construction, while federal government and financial activities experienced job losses.
2025 DATA CLARIFIED
The establishment survey data released in mid-February were benchmarked to reflect comprehensive counts of payroll jobs for March 2025. This annual benchmark process results in revisions to seasonally adjusted data from January 2021 forward. The updated figures show the labor market added only 181,000 jobs in 2025, down sharply from the previously reported 584,000. The revised job gains for 2025 are far fewer than the 1.46 million jobs added in 2024. Excluding recession years (2008, 2009, and 2020), 2025 now stands as the weakest year of employment growth since 2003.
Wage growth was unchanged in January, with average hourly earnings rising 3.7 percent year-over-year, a pace that is 0.3 percentage points lower than a year ago. Importantly, wage growth has been outpacing inflation for nearly two years, which typically occurs as productivity increases.
Looking at the overall employment picture nationally, the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS) reports that total nonfarm payroll employment rose by 130,000 in January, marking the strongest monthly gain since December 2024. The unemployment rate edged down to 4.3 percent in January, following a 4.4 percent level in December. Over the month, the number of people unemployed declined by 141,000, while the number of people employed increased by 528,000.
Meanwhile, the labor force participation rate, or the proportion of the population either looking for a job or already holding a job, edged up 0.1 percentage points to 62.5 percent. This remains below its pre-pandemic level of 63.3 percent recorded at the beginning of 2020. Among prime working-age individuals (aged 25 to 54), the participation rate rose to 84.1 percent, the highest level since 2001, reflecting strong engagement in the core workforce.
When we focus on construction employment as a subset of the national employment picture, the picture tends to be similar. Employment in the overall construction sector increased by 33,000 jobs in January, after an upwardly revised loss of 4,000 in December. Within the industry, residential construction added 5,900 jobs, while non-residential construction added 27,900 positions. Overall construction employment was essentially flat in 2025, compared with a gain of 176,000 jobs in 2024.
Residential construction employment now stands at 3.3 million in January, including 952,000 workers employed by builders and remodelers and nearly 2.4 million residential specialty trade contractors. The six-month moving average of job gains for residential construction remains negative, at a loss of 2,083 per month, reflecting losses in three of the past six months. Over the last 12 months, residential construction has seen a net loss of 43,600 jobs, marking the eleventh consecutive annual decline and the longest stretch of annual losses since the Great Recession.
Since the low point following the Great Recession, residential construction has gained 1,312,900 positions. Lower interest rates will drive more new home construction, which will, in turn, drive residential construction employment.