Tracking Labor Market Strength

To begin with, here are some general thoughts on the US Labor Market.

Also, a quick note:

• BLS net revisions for 2024 were significant. Labor force population estimates were revised down by 610k from 159.5 mn to 158.9 mn for Dec. BLS suggested that the new estimates reflected “updated methodology and new information about net international migration in recent years.” In plain English, a large number of survey participants, most likely illegal immigrants, who were previously counted as part of the workforce, may no longer be recognized so.
• In addition, BLS revised down the jobs growth number for 2024 by about 236k although for Nov and Dec they were revised up by 100k, indicating a sharp 336k downward revision for the first 10 months in 2024, implying earlier estimates were significantly overstated.
• Stats cited here use revised estimates of Seasonally Adjusted data sets collected by the BLS through the Household Survey, Establishment Survey, and Other Surveys.

Total Non-Farm Payroll:

143k new workers joined the labor force in Jan 2025. This is a deceleration from a short-window 3-mo moving average (sma) of 237k and long-window 12-mo moving average (lma) 168k in Non-Farm Payroll as of Jan. For context, monthly growth in Non-Farm Payroll was 132k post-GFC, running at 129k pre-Covid (2009 to 2019, both inclusive) and 138k post-Covid (starting 2020), indicating a steady pace of growth in Non-Farm Payroll in the post-Pandemic era.

Note:

• There was significant upward revision to Nov and Dec NFP e.g. Total NFP for Dec was revised up from 256k to 307k.
• Also, the anemic Oct print fell off the radar from sma calculation.
• The two factors above contributed to sma moving up notably this month and is mostly propagated to the Private Payroll sub-categories.

1. Private Payroll:

111k new workers joined the private sector in Jan 2025. This is a deceleration from 209k sma and 132k lma in Private Payroll as of Jan. For context, monthly growth in Private Payroll is 126k post-GFC running at 127k pre-Covid and 125k post-Covid, indicating a steady pace of growth in Private Payroll in the post-Pandemic era.

2.?Government:

32k new workers joined the government sector in Jan 2025. This is in line with a 28k sma and 36k lma in Government jobs as of Jan. For context, monthly growth in Government jobs was 5k post-GFC running at 1k pre-Covid and 13k post-Covid, indicating a sizable acceleration in Government jobs growth in the post-Pandemic era.

Household and Other Surveys:

The unemployment rate dropped from 4.1% to 4.0% in Jan 2025. This is slightly below 4.1% sma and 4.1% lma as of Jan. For context, avg Unemployment Rate stood at 6% post-GFC, running at 6.5% pre-Covid and 4.9% post-Covid, indicating a significant tightening of the labor market in the post-Pandemic era.

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Labor Force Participation Rate (defined by the BLS as “the percentage of the population that is either working or actively looking for work”) improved from 62.5% to 62.6% in Jan 2025. This is slightly above 62.5% sma and in line with 62.6% lma as of Jan. For context, avg Participation Rate stood at 63.1% post-GFC, running at 63.5% pre-Covid and 62.2% post-Covid, indicating a meaningful drop in labor market participation in the post-Pandemic era.

Average Hourly Earnings increased by 4.3% YoY in Q4, which is slightly below the 4.4% avg for the trailing 12-mo. For context, avg AHE growth stood at 3.3% post-GFC, running at 2.4% pre-Covid and 5.1% post-Covid, indicating a breakneck pace of earnings growth in the post-Pandemic era partly reflecting adjustments for the unusual inflation following the pandemic. [Note: I prefer obtaining Hourly Earnings from the Productivity and Costs Release published quarterly by the BLS instead of the monthly Establishment Survey data as the former dataset, among a few other advantages, ties in better with labor productivity data which in turn gives me a deeper understanding of the labor force in terms of Output.]

Digging a bit deeper:

1.1.? Private Payroll: Goods Producers:

Labor force growth was flat in the Goods Producing Sector in Jan 2025. This is a deterioration from the 9k sma and 5k lma in this sector as of Jan. For context, monthly growth in Private Payroll’s Goods Producing Sector is 8k post-GFC running at 5k pre-Covid and 14k post-Covid, indicating a significant pick up in Private Payroll’s Goods Producing Sector in the post-Pandemic era with a trend of normalization in recent months.

Note: sma for Goods Producers moved up notably this month as the contractionary Oct print for Goods Producing Sector fell off the radar.

1.1.1.?Goods: Manufacturing:

3k jobs were added to the Manufacturing Sector within Private Payroll: Goods Producers in Jan 2025. This is a slight deterioration from 4k sma, but a significant improvement from -9k lma in this sector as of Jan. For context, monthly growth in Manufacturing is almost flat post-GFC, running at -1k pre-Covid and +1k post-Covid, indicating a pick-up in Manufacturing labor force in the post-Pandemic era with some notable variations in recent months.

Within Manufacturing, 3k jobs were lost in Durable Goods Sector (e.g. Motor Vehicles, Appliances, Furniture) in Jan 2025. This is somewhat of a deterioration from +2k sma, but a significant improvement from -9k lma in this sector as of Jan. For context, monthly growth in Durable Goods labor is -1k post-GFC, running at -1k pre-Covid and flat post-Covid, indicating a slight reversal of the deterioration in Durable Goods Sector labor force in the post-Pandemic era. While growth in headcount turned extremely choppy in Q4, the preceding few quarters since late 2022 had a clear downward bias pointing towards a loss of momentum in durable goods’ job growth that was observed immediately following the pandemic.

Within Manufacturing, 6k jobs were added in Nondurable Goods Sector (e.g. Household Supplies, Consumables, Personal Care products) in Jan 2025. This is a visible improvement from 2k sma, and flat lma in this sector as of Jan. For context, monthly growth in Nondurable Goods labor is 1k post-GFC, running flat pre-Covid and 2k post-Covid, indicating a pick-up in Nondurable Goods labor in the post-Pandemic era.

1.1.2.?Goods: Construction:

4k jobs were added in the Construction Sector within Private Payroll: Goods Producers in Jan 2025. This is a deceleration from 8k sma and 15k lma in this sector as of Jan. For context, monthly growth in Construction is 9k post-GFC, running at 6k pre-Covid and 14k post-Covid, indicating a significant pick-up in Construction labor force in the post-Pandemic era with a trend of normalization in recent months.

1.1.3.?Goods: Mining & Logging:

7k jobs were lost in Mining & Logging Sector within Private Payroll: Goods Producers in Jan 2025. This is a slight deterioration from -3k sma, and -1k lma in this sector as of Jan. For context, monthly growth in Mining & Logging is -1k post-GFC, running at -1k pre-Covid and -1k post-Covid, indicating a continued contraction in Mining & Logging labor force in the post-Pandemic era with a continuation of the same trend in recent months.

1.2.??Private Payroll: Private Service Providers:

Service Providers within Private Payroll has been maintaining a steady pace of labor force growth. 111k jobs were added to Private Service Providers in Jan 2025. This print is below 201k sma and 127k lma in this sector as of Jan. For context, monthly growth in Private Payroll’s Service Providing Sector is 119k post-GFC, running at 122k pre-Covid and 111k post-Covid, indicating a slight deceleration of growth in Private Payroll’s Service Providing Sector in the post-Pandemic era.

1.2.1.?Services: Professional & Business Services:

Professional & Business Services include a broad range of Professional, Scientific, Technical Services as well as Management, Administrative, Waste Management Services (e.g. legal, accounting, payroll, engineering & design services, consulting, recruitment, cleaning). With the exception of a handful of months, such as Jan and May this year, hiring in this category remained subdued since Q3 last year. 11k jobs were lost in Professional & Business Services in Jan 2025. This is significantly below +19k sma and below -6k lma in this sector as of Jan. For context, monthly growth in this category is 28k post-GFC, running at 31k pre-Covid and 21k post-Covid, indicating a reasonably steady pace of growth in this part of the labor force in the post-Pandemic era. Although this month was downbeat again, recent months have shown some signs of reversal of the deterioration observed in this sector since Q2 2023.

1.2.2.?Services: Leisure & Hospitality Services:

3k jobs were lost in Leisure & Hospitality Services in Jan 2025. This is significantly below 33k sma and 22k lma in this sector as of Jan. For context, monthly growth in this category is 22k post-GFC, running at 27k pre-Covid and 11k post-Covid, indicating a subdued pace of growth in this part of the labor force in the post-Pandemic era, potentially denoting that a recovery is still due for the sector that effectively came to a standstill and experienced a massive shrinkage in the labor force immediately following the pandemic.

1.2.3.?Services: Retail Trade:

With the exception of early 2023 and a brief period between Dec 2023 to Apr 2024, Labor force recovery in the Retail Trade Sector has been choppy at best since Q4 2022. 34k jobs were added in the Retail Trade Sector in Jan 2025. This is above 19k sma and 4k lma in this sector as of Jan. For context, monthly growth in this category was 4k post-GFC, running at slightly above 5k pre-Covid and around 2k post-Covid, indicating a slowdown in this part of the labor force in the post-Pandemic era.

1.2.4.?Services: Education & Healthcare Services:

61k jobs were added to Education & Healthcare Services in Jan 2025. This is a slight deceleration from 72k sma and 80k lma in this sector as of Jan. For context, monthly growth in this category is 40k post-GFC, running at 38k pre-Covid and 44k post-Covid, indicating a slightly accelerating pace of growth in this part of the labor force in the post-Pandemic era.

Of the 61k new additions, 66k jobs were added to Healthcare & Social Assistance category in Jan 2025. This is a slight deceleration from 75k sma and 76k lma in this sector as of Jan. For context, monthly growth in this category is 35k post-GFC, running at 33k pre-Covid and 40k post-Covid, indicating a pick-up in growth in this part of the labor force in the post-Pandemic era.

1.2.5.?Services: Financial Services:

7k jobs were added to Financial Services in Jan 2025. This is a meaningful deceleration from 14k sma, but in line with 5k lma as of Jan. For context, monthly growth in this category is slightly above 6k post-GFC, running at slightly below 6k pre-Covid and 7k post-Covid, indicating a small pick-up in growth in this part of the labor force in the post-Pandemic era.

1.2.6.?Services: Transportation & Warehousing:

1k jobs were added to Transportation & Warehousing Services in Jan 2025. This is significantly below 17k sma and 11k lma in this sector as of Jan. For context, monthly growth in this category is 12k post-GFC, running at 11k pre-Covid and 16k post-Covid, indicating an acceleration in hiring in this part of the labor force in the post-Pandemic era. This acceleration was likely driven by an increased goods consumption immediately following the pandemic as well as changes in the supply-chain demanded by the increasing dominance of firms such as Amazon and Shopify that catered to elevated online-purchasing demand for goods.

1.2.7.?Services: Wholesale Trade:

2k jobs were added to the Wholesale Trade Services in Jan 2025. This is below 7k sma and 4k lma in this sector as of Jan. For context, monthly growth in this category is 2k post-GFC, running at 1k pre-Covid and 5k post-Covid, indicating a meaningful acceleration in growth in this part of the labor force in the post-Pandemic era.

1.2.8.?Services: Information Services:

After a sharp rebound in Information Services jobs in 2021 (21k/mo) from Covid induced losses in 2020 (avg loss of 15k/mo), the sector kept on adding to headcount in 2022 (10k/mo). This was followed by a contraction in headcount in the following 2 years (avg loss of 4k/mo). 2k jobs were added to Information Services in Jan 2025. This is a visible deceleration from 8k sma, but an improvement from -2k lma in this sector as of Jan. For context, monthly growth in this category is about flat post-GFC, running about flat pre-Covid and 1k post-Covid, indicating a slight pick-up in growth, albeit mostly front-loaded, in this part of the labor force in the post-Pandemic era.

1.2.9.?Services: Utilities:

Employment growth in Utilities Sector is flat in Jan 2025. This is in line with flat sma and 1k lma in this sector as of Jan. For context, monthly growth in this category is flat post-GFC, running flat pre-Covid and 1k post-Covid, indicating a pick-up in growth in this part of the labor force in the post-Pandemic era.

1.2.10.?Services: Other Services:

17k jobs were added to Other Services in Jan 2025. This is above 13k sma and 9k lma in this sector as of Jan. For context, monthly growth in this category is 3k post-GFC, running at 4k pre-Covid and 3k post-Covid, indicating a slowdown in this part of the labor force in the post-Pandemic era, although showing an upward bias in the recent months.

*numbers are approximate; source: FRED, BLS; as of: Feb-2025

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