Forecasts for January Jobs Report Show Another Month of Healthy Growth

Forecasts for the January jobs report suggest the labor market remained resilient last month, continuing to add jobs at a healthy clip. That strength gives the Federal Reserve leeway to leave interest rates higher than it previously expected, as inflation has been sticky and the economic impact of new policies in Washington remains uncertain.

Overall, economists predict the US economy added 170,000 jobs in January, according to FactSet’s consensus estimates. That’s a softer reading than December’s blockbuster print of 256,000 jobs, but analysts say it still indicates a strong labor market. The unemployment rate is expected to remain steady at 4.1%.

José Torres, senior economist at Interactive Brokers, expects even stronger job growth than the consensus, looking for 190,000 jobs added in January. “Small and medium-sized businesses are buoyant, and they’ve been adding employees because they think the economy is going to grow a lot faster under this new administration,” he says. He points to expected eased taxation, a lighter regulatory environment, and a greater focus on domestic manufacturing.

Economists at Goldman Sachs also anticipate 190,000 jobs added for the month, citing a low pace of layoffs and strength in other sources of labor market data. Bank of America economists expect 200,000 jobs added. They say wildfires in California last month could account for a drag of 15,000-20,000 jobs.

January Jobs Report Forecast Highlights

• Jobs report release date and time: Friday, Feb. 7, at 8:30 a.m. EDT
• Nonfarm payroll employment is forecast to rise 170,000 vs. a 256,000 increase in December, according to FactSet.
• The unemployment rate is forecast to remain steady at 4.1%.
• Hourly earnings are predicted to rise 0.3% on a monthly basis, the same as in December.

Torres expects the education and health services sectors to lead job gains. He’s also looking for gains in the leisure, hospitality, and retail sectors, as well as state and local government. While there are still question marks surrounding policy in Washington, he says he’ll be watching how changes in immigration policy impact the labor force. If the workforce shrinks, for instance, the unemployment rate could rise.

January’s jobs report will also include the Bureau of Labor Statistics’ annual revisions to the nonfarm payrolls survey. Analysts watch these revisions closely, since large changes to previous months’ data can dramatically change the picture for the labor market. Economists from Bank of America don’t expect that to be the case this time. They believe downward revisions will be concentrated in the second half of 2023, while revisions to job growth in the first quarter of 2024 will be more minor. “In other words,” they wrote in a note to clients, “recent job growth shouldn’t be significantly impacted.”

When Will the Fed Cut Rates Again?

The Fed held interest rates steady at its first meeting of 2025, citing “solid” labor market conditions and an unemployment rate that has stabilized at a low level. Central bankers cut rates three times at the end of 2024, bringing the target federal funds rate down from its peak range of 5.25%-5.50% to its current range of 4.25%-4.50%.

Most analysts are not anticipating another rate cut until March or June (if the central bank cuts again at all), pending more data on inflation and clarity on policy in Washington. For now, markets see a roughly 83% chance that the Fed remains on hold at its next meeting in March, according to the CME FedWatch Tool.