The jobs picture still looks muddy, even with surprisingly strong January growth

January job gains were better than anything the U.S. economy saw in 2025 but not still enough to sound an all-clear on what has otherwise been a stagnant labor market.

With a gain of 130,000 nonfarm payrolls and the unemployment rate slipping to 4.3%, the lowest since August, the numbers indicated that hiring is at least hanging in there while layoffs appear contained.

However, beneath the hood there were some trouble spots: A continued concentration in just a few fields where hiring is happening; revisions that meant virtually no gains in the second half of 2025, and questions over what happens from here as companies contend with a high level of uncertainty.

“I would anticipate that for the rest of the year, job growth is going to be quite subdued,” said Gregory Daco, chief economist at EY-Parthenon. “Whether it's as subdued as 2025 ... is still an open question. But I would not expect job growth to be higher than 50,000 for the remainder of 2026.”

Indeed, revisions the Bureau of Labor Statistics released Wednesday put job gains last year at just 15,000 a month. The last six months of the year produced a net loss of 1,000 jobs. In the recent words of Federal Reserve Governor Christopher Waller, the year's job growth was close to “Zero. Zip. Nada.”

Also, nearly all the January jobs came from health care-related sectors, raising questions over the ability of displaced and new workers to be able to get hired.

On top of the anemic gains, Daco has another worry. He sees trouble brewing with the receding income gains for cash-strapped consumers possibly causing damage not readily visible in headline economic numbers.

Average hourly earnings advanced 0.4% in January, slightly higher than expected, but the annual gain of 3.71% was the lowest since July 2024. With retail sales unexpectedly flat in December, and consumer spending responsible for more than two-thirds of all U.S. economic activity, that could spell a potential danger sign.

“We're heading from a jobless expansion to potentially an income-less expansion, because income is essentially the combination of jobs and wages. With both under pressure, that means that for many families, income and income growth prospects are muted,” Daco said.