Job growth accelerated last month, the first clear hint that the economy in 2026 might do better than it did in 2025.
The U.S. economy added 130,000 jobs in January, the best monthly showing by far in President Donald Trump’s second term. Unemployment fell slightly from 4.4% to 4.3%. If that pace of job growth continues in the coming months, it would suggest a rebound from a feeble 2025. The report blew past most economists’ projections and prompted a release from the White House.
“Today’s blockbuster, expectation-shattering jobs report proves that President Trump’s economic agenda continues to pay off,” said White House deputy press secretary Kush Desai.
Why We Wrote This
With a positive January jobs report following a slow 2025, Republicans may have improved their ability to retain their slim House majority. But economists, citing uncertainty, are watching inflation and job growth closely.
But many economists are skeptical that those gains will be sustainable.
“I’ll take the number,” says Mark Zandi, chief economist of Moody’s Analytics. But “I don’t take any solace in it.” Too much uncertainty reigns, he adds.
The direction of the economy will be crucial this year in the run-up to the nation’s midterm elections. If it continues to improve, Republicans have a better shot at retaining their slim majority in the House of Representatives. But voters will be watching closely, especially inflation and job growth. (The latest inflation numbers from the consumer price index are due out on Friday.) Earlier this year, a Fox News poll found that 54% of Americans think the country is worse off today than a year ago, compared with 31% who say it is better off.
On the plus side, the stimulus effect of Mr. Trump’s tax cuts in the One Big Beautiful Bill Act should put an extra $300 to $1,000 in taxpayers’ pockets this year, according to the Tax Foundation. Also, with supply chains adjusting to the initial shock of the president’s tariff campaign, the impetus for inflation, which has remained around 3% for months, could lessen this year, some economists say.
But heavy clouds loom.
Weighing tariffs, AI, and DOGE cuts
The uncertainty over tariffs continues as the president issues new threats of possible duties on foreign nations. In the latest twist, he reportedly is considering withdrawing from the trade pact he negotiated with Mexico and Canada, known as the USMCA. Separately, the House was due to vote Wednesday on a possible rejection of some of President Trump’s tariffs, a rare rebuff. Some Republicans joined House Democrats to force the vote. The Tax Foundation estimated this week that tariffs cost American households $1,000 last year and will cost $1,300 this year.
Another uncertainty: possible job cuts as companies adapt to and deploy artificial intelligence. Researchers are divided on AI’s potential impact on employment. Some suggest firms will redeploy their current workers to take on new, higher-order tasks. Others say they will simply fire them and take the profits from the boosts in productivity.
The administration’s crackdown on immigration is also driving down the supply of workers. In the short term, that dearth of new workers might make it easier for Americans to find jobs. But it also means a long-term drag on economic growth, economists say.
Private sector gains offset public sector losses
Then there’s the unemployment report itself. First, as the White House points out, the private sector job gains in January were actually higher – 172,000 – than the overall number. Jobs at all levels of government fell by 42,000 during the month. The administration has acted aggressively to trim federal payrolls.
Second, new benchmark revisions to previous months’ totals showed that 2025 job growth was especially weak. Employment grew by only 181,000 jobs, or 0.23%, the worst performance of any administration’s first 12 months since President Barack Obama took over in 2009 during the Great Recession. (See chart.)
Also worrying: Almost all of January’s job gains came from two sectors, health care and construction, points out Nancy Vanden Houten, lead economist at Oxford Economics, in a published note following the release of the January employment report.
“The January employment report surprised to the strong side,” she noted. “But [it] overstates any emerging strength in the labor market.”