Washington– The American economy is on the verge of rupture. So why is the American labor market lagging behind?
The Labor Department is expected to announce Wednesday that companies, government agencies and nonprofits added 75,000 jobs last month, according to a survey of forecasters conducted by the data firm FactSet. That would be an improvement over December’s 50,000 — but it’s inconsistent with strong economic growth and much less than the hiring boom of just two years ago.
Moreover, the January numbers are likely to be overshadowed by the Labor Department’s revisions, which would sharply reduce job creation by 2025 — and perhaps even eliminate it altogether. The labor market weakness reflects the continuing impact of high interest rates, billionaire Elon Musk’s purge of the federal workforce last year, and uncertainty caused by President Donald Trump’s erratic trade policies, which have left businesses uncertain about the economic outlook.
The dismal numbers came ahead of Wednesday’s report. Employer posting only 6.5 million job opportunities In December, the lowest number in more than five years.
Payroll processor ADP reported last week that private sector employers added 22,000 jobs in January, far fewer than economists had expected. Challenger Gray Outplacement Company & Businesses cut more than 108,000 jobs last month, the most since October and the worst January for job cuts since 2009, Christmas reported.
Several well-known companies announced layoffs last month. UPS cuts 30,000 Jobs. Chemical giant Dow is turning to more automation and artificial intelligence 4500 pieces Jobs. And Amazon is Ending 16,000 corporate jobsthe second round of mass layoffs in three months.
A stagnant labor market is disproportionate to the performance of the economy.
From July to September, America’s gross domestic product – the production of goods and services – advanced at an annual rate of 4.4%, the fastest in two years. Consumer spending was strong, and growth was boosted by rising exports and declining imports. This came in addition to strong growth of 3.8% in the period from April to June.
Economists wonder whether job creation will eventually accelerate to catch up with strong growth, perhaps as President Donald Trump’s tax cuts translate into large tax refunds that consumers start spending this year. But there are other possibilities. GDP growth may slow and fall in line with a weak labor market or advances in artificial intelligence and automation may mean that the economy could move forward without creating many jobs.
Labor Department numbers currently show that US employers added 49,000 jobs per month in 2025. (In the 2021-2023 hiring boom, by contrast, they were creating 400,000 jobs per month.)
But last year’s lackluster numbers are sure to fall sharply on Wednesday when the government publishes annual benchmark revisions, intended to take into account the more accurate jobs numbers that employers report to state unemployment agencies. A preliminary estimate of this adjustment, issued last September, showed that it could wipe out 911,000 jobs in the year ending in March 2025. Economists expect the final record adjustment on Wednesday to be somewhat smaller than that.
Adding to the confusion: The Labor Department is also revising the most recent payroll numbers to reflect better information about how many companies have opened or closed. Shruti Mishra, US economist at Bank of America, believes these revisions are likely to reduce job creation by 20,000-30,000 per month from April 2025 onwards. Federal Reserve Chairman Jerome Powell said current numbers may overstate job creation by 60,000 jobs per month.
Overall, the revisions could mean the U.S. economy actually loses jobs in 2025, the first annual decline since the pandemic and lockdown in 2020, Stephen Brown of Capital Economics wrote in a commentary.
While the revisions cloud employment numbers, Bank of America’s Mishra wrote in a commentary last week that the unemployment rate provides a better measure of how the labor market is performing. It expects it to remain low at 4.4% in January.
Despite recent high-profile layoffs, the unemployment rate hasn’t looked as bleak as the employment numbers.
That’s partly because President Donald Trump’s campaign against immigration has reduced the number of foreign-born people competing for work.
As a result, the number of new jobs the economy needs to create to keep the unemployment rate from rising — the break-even point — falls. In 2023, when migrants were flocking to the United States, the number reached 250,000, according to economist Anton Cheremukhin of the Federal Reserve Bank of Dallas. By mid-2025, Cheremukhin found, the number had fallen to 30,000. The Brookings Institution believes the number may now reach 20,000 and trend down.
The combination of weak employment and low unemployment rates means that most American workers enjoy job security. But those looking for jobs — especially young people who could compete at the entry level with artificial intelligence and automation — often struggle to get a job.