WASHINGTON (AP) — The U.S. economy is on a tear. So why is the American job market limping behind?
The Labor Department is expected to report Wednesday that companies, government agencies and nonprofits added 75,000 jobs last month, according to a survey of forecasters by the data firm FactSet. That would be an improvement over December’s 50,000 – but it’s inconsistent with strong economic growth and well short of the hiring boom of just a couple of years ago.
Moreover, the January numbers are likely to be overshadowed by Labor Department revisions that will sharply reduce 2025 job creation – and might even wipe it out altogether. The job market's weakness reflects the lingering impact of high interest rates, billionaire Elon Musk's purge last year of the federal workforce and uncertainty arising from President Donald Trump's erratic trade policies, which have left businesses unsure about the economic outlook.
Dreary numbers have been coming in ahead of Wednesday’s report. Employers posted just 6.5 million job openings in December, fewest in more than five years.
Payroll processor ADP reported last week that private employers added 22,000 jobs in January, far fewer than economists had forecast. And the outplacement firm Challenger, Gray & Christmas reported that companies slashed more than 108,000 jobs last month, the most since October and the worst January for job cuts since 2009.
Several well-known companies announced layoffs last month. UPS is cutting 30,000 jobs. Chemicals giant Dow, shifting to more automation and artificial intelligence, is cutting 4,500 jobs. And Amazon is ending 16,000 corporate jobs, its second round of mass layoffs in three months.
The sluggish job market doesn’t match the economy’s performance.
From July to September, America’s gross domestic product – its output of goods and services – galloped ahead at a 4.4% annual pace, fastest in two years. Consumer spending was strong, and growth got a boost from rising exports and tumbling imports. And that came on top of solid 3.8% growth from April through June.
Economists are puzzling out whether job creation will eventually accelerate to catch up to strong growth, perhaps as President Donald Trump’s tax cuts translate into big tax refunds that consumers start spending this year. But there are other possibilities. GDP growth could slow and fall into line with a weak labor market or advances in AI and automation could mean that the economy can roar ahead without creating many jobs.
Labor Department numbers currently show that U.S. employers added an unimpressive 49,000 jobs a month in 2025. (In the hiring boom of 2021-2023, by contrast, they were creating 400,000 jobs a month.)
But last year’s already lackluster numbers are sure to be marked down sharply on Wednesday when the government releases annual benchmark revisions, meant to take into account the more-accurate jobs numbers that employers report to state unemployment agencies. A preliminary estimate of that revision, released last September, showed it could erase 911,000 jobs in the year that ended in March 2025. Economists expect that Wednesday’s final benchmark revision will be somewhat smaller than that.
Adding to the muddle: The Labor Department is also revising more-recent payroll numbers to reflect better information about how many businesses have opened or shut down. Shruti Mishra, U.S. economist at Bank of America, believes those revisions likely reduced job creation by 20,000 to 30,000 a month from April 2025 onward. Federal Reserve chair Jerome Powell has said the current numbers may overstate job creation by 60,000 a month.
Altogether, Stephen Brown of Capital Economics wrote in a commentary, the revisions could mean that the American economy actually lost jobs in 2025, the first annual drop since the pandemic and lockdown year of 2020.
As revisions muddy the hiring numbers, Bank of America’s Mishra wrote in a commentary last week, the unemployment rate is providing a better gauge of how the job market is doing. She expects that it stayed low at 4.4% in January.
Despite recent high-profile layoffs, the unemployment rate hasn’t looked as dismal as the hiring numbers.
That is partly because President Donald Trump’s immigration crackdown has reduced the number of foreign-born people competing for work.
As a result, the number of new jobs that the economy needs to create to keep the unemployment rate from rising – the “break-even’’ point -- has tumbled. In 2023, when immigrants were pouring into the United States, it reached a high of 250,000, according to economist Anton Cheremukhin of the Federal Reserve Bank of Dallas. By mid-2025, Cheremukhin found, it was down to 30,000. Researchers at the Brookings Institution believe it could now be as low as 20,000 and headed lower.
The combination of weak hiring but low unemployment means that most American workers are enjoying job security. But those who are looking for jobs – especially young people who can be competing at the entry level with AI and automation – often struggle to land one.
Hiring sign is displayed in front of a restaurant in Chicago, Thursday, Feb. 5, 2026. (AP Photo/Nam Y. Huh)
