The latest “Employment Situation Summary” report from the U.S. Bureau of Labor Statistics (BLS) showed the labor market started the year on a downshift from 2024. EY senior economist Lydia Boussour told Entrepreneur in an emailed statement that the findings give the Federal Reserve “the luxury of time” to cut rates.
The report showed that the U.S. economy added 143,000 new jobs in January, below consensus forecasts of 170,000 and beneath the average monthly gain of 166,000 jobs in 2024. Boussour described the labor market as “frozen, but robust.”
“Business executives continue to rein in hiring but are still holding off on layoffs as they navigate a more uncertain economic and policy environment,” she stated.
January’s job gains were highest in the healthcare, retail, and social assistance industries, each of which added at least 22,000 jobs. Employment meanwhile declined by 8,000 jobs over the month in the mining, quarrying, oil, and gas extraction industry after little change in 2024.
Federal Reserve chair Jerome Powell. Photo by Yasin Ozturk/Anadolu via Getty Images
The private sector added 111,000 jobs in January while government roles increased by 32,000. Private sector wages rose by 17 cents over the month to $35.87 while the average workweek decreased by 0.1 hours to 34.1 hours.
The report also showed that the unemployment rate was at 4%, its lowest level since May 2024, according to the NYTimes.
Boussour expects job growth to continue to be below last year’s average of 166,000 jobs added per month and for the unemployment rate to increase towards 4.4% as businesses conduct more layoffs.
When it comes to Federal Reserve policy, she says that the Fed will be more cautious in reaction to the January jobs report and slow down the pace of rate cuts.
“We believe Fed policymakers will judge the labor market as giving them the luxury of time when it comes to easing monetary policy further, especially considering the stronger wage figures,” Bousssour stated. “Even though we anticipate inflation will decelerate markedly in the coming months while labor market conditions cool, we anticipate the Fed will maintain a wait-and-see approach.”
While Boussour previously expected three rate cuts in 2025 (in March, June, and September), she now anticipates only two cuts in June and December.
