After a five-day delay caused by a brief government shutdown, the much-anticipated January jobs report is finally set to be released this Wednesday at 8:30 a.m. ET. Markets are bracing for a significant data dump, not only from the headline nonfarm payroll figures but also from a crucial batch of annual revisions that could fundamentally alter our understanding of the U.S. labor market’s recent performance. Economists widely anticipate a report showing minimal to no job growth for January, a sentiment echoed by even White House officials who have spent the week tempering expectations.
The January Payroll Puzzle
The consensus among economists for January’s nonfarm payrolls report hovers around a modest 55,000 new jobs, a figure that has been steadily trending downwards. This follows a December increase of 50,000. However, many experts are preparing for an even bleaker picture. Mark Zandi, chief economist at Moody’s Analytics, starkly stated, “I think zero would be the forecast… Anything around zero just shows you how fragile things are, just very weak.” He warned that while layoffs haven’t surged yet, they are likely to pick up, potentially leading to job losses soon.
While the Dow Jones consensus projects a 55,000 gain, with the unemployment rate holding steady at 4.4% and annual wage gains at 3.7%, Wall Street is divided. Goldman Sachs forecasts an even lower increase of 45,000, while Citigroup, despite projecting a higher 135,000 gain, attributes much of it to seasonal distortions, suggesting “appropriately adjusted payroll growth… closer to zero.” This divergence underscores the uncertainty surrounding the true health of the job market.
Unpacking the Benchmark Revisions
Perhaps even more impactful than the January figures are the final benchmark revisions from the Bureau of Labor Statistics (BLS). These revisions, covering the 12 months leading up to March 2025, have been a “nettlesome problem” for the BLS, which has grappled with timely and relevant data. Last September, preliminary adjustments suggested a staggering 911,000 fewer jobs than previously reported for that period – nearly half the total. While the final count expected this Wednesday might be slightly less, it is still projected to be significant, with Goldman Sachs estimating between 750,000 and 900,000 fewer jobs, and Fed Chair Jerome Powell hinting at around 600,000.
The trend is clear: every month of 2025 reported so far has seen downward revisions, collectively shaving off 624,000 from initial estimates and leaving average monthly payroll gains at less than 40,000. Wednesday’s report will also include the first revision for December’s count and adjustments to the BLS’s model for estimating jobs from business openings and closings. These revisions will undoubtedly paint a picture of a stumbling labor market, a reality that Federal Reserve policymakers will scrutinize closely as they consider future policy moves.
White House Manages Expectations
In a preemptive move, White House officials have been actively trying to manage public expectations. Kevin Hassett, the National Economic Council director, explained that several converging factors are contributing to lower payroll growth. He highlighted the administration’s efforts to address illegal immigration and, notably, rising productivity fueled by advancements in artificial intelligence, which he believes is reducing businesses’ immediate need to hire.
“One shouldn’t panic if you see a sequence of numbers that are lower than you’re used to,” Hassett advised, attributing this to declining population growth and skyrocketing productivity. He even posited a scenario where “job creation lags, productivity skyrockets, profits skyrocket, GDP skyrockets,” suggesting a new economic paradigm where fewer jobs don’t necessarily equate to a weaker economy overall.
Broader Signs of Softening
Beyond the headline numbers, other recent indicators reinforce the narrative of a cooling labor market. Job openings in December plummeted to their lowest level since September 2020, according to the BLS. Simultaneously, planned layoffs and hires recorded their worst January since the 2009 global financial crisis, as reported by Challenger, Gray & Christmas. ADP’s private hiring report for January also showed a meager 22,000 new jobs. While Homebase reportedly indicated some positive trends for small businesses, the overall picture points towards a significant deceleration in labor market momentum, making Wednesday’s comprehensive report a critical barometer for the U.S. economy.
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