By Lucia Mutikani
WASHINGTON, Feb 11 (Reuters) – U.S. job growth likely picked up in January, supported by fewer layoffs in some seasonal industries, but the labor market remained sluggish as lingering uncertainty over import tariffs tempered hiring and tighter immigration enforcement constrained the supply of workers.
The Labor Department’s closely watched employment report on Wednesday is also expected to show the unemployment rate steady at 4.4% last month and annual wage growth cooling. Economists said the Trump administration’s trade and immigration policies have chilled the labor market, though they expected tax cuts to boost hiring this year.
The labor market has struggled despite robust economic growth. Anxiety over jobs and high inflation has eroded Americans’ approval of President Donald Trump’s handling of the economy. Seasonally sensitive industries like retailers and delivery companies hired fewer holiday workers than usual last year. January is typically the biggest month for holiday-related layoffs. Given the low seasonal hiring, layoffs were probably fewer, which would lift employment gains.
“The underlying stress in the labor market is greater than the overall unemployment suggests,” said Diane Swonk, chief economist at KPMG. “Wages are cooling, it’s harder to get a job if you lose a job, and it’s harder to get a job if you’re a new graduate. It still is a very much frozen labor market, as hot as the economy looks on paper.”
Nonfarm payrolls likely increased by 70,000 jobs last month after rising 50,000 in December, a Reuters survey of economists showed. The employment report, initially due last Friday, was delayed by the three-day shutdown of the federal government.
Estimates ranged from a loss of 10,000 jobs to a gain of 135,000 positions. Some private surveys have suggested job losses in January.
Effective with the January report, the Bureau of Labor Statistics, which compiles the data, will update the birth-and-death model by incorporating current sample information each month. This model, which is a method the BLS uses to try to estimate how many jobs were gained or lost because of companies opening or closing in a given month, has been blamed for an overcounting of payrolls.
The BLS will also publish its annual benchmark payrolls revision. The agency last year estimated the economy likely created 911,000 fewer jobs in the 12 months through March 2025 than previously estimated. Economists, however, expected the downgrade to be in the 750,000-900,000 range.
The update to the birth-and-death model follows the same methodology applied to the April-October 2024 estimates post-benchmark. Economists at Goldman Sachs estimated the update could contribute 30,000-50,000 fewer jobs to payroll growth than in recent months. They expected downward revisions to payrolls data from April to December 2025.
REDUCED LABOR FORCE IS CURBING EMPLOYMENT GAINS
“People are still leaving the country. I think that is what has been hurting some of the payroll numbers,” said Ron Hetrick, a senior labor economist at Lightcast. “Anemic is the key word.”
White House economic adviser Kevin Hassett on Monday warned of lower job gains in the months ahead because of slower labor force growth. The Census Bureau last week said the nation’s population increased by just 1.8 million people, or 0.5%, to 341.8 million in the year ending June 2025. Trump made cracking down on U.S. immigration a cornerstone of his election campaign.
The BLS will next month introduce new annual population controls for the household survey with February’s employment report after they were delayed by last year’s 43-day government shutdown. These adjust for updated population estimates, including migration.
The unemployment rate is derived from the household survey.
Given the reduction in the labor force, economists believe the economy needs to create 10,000-50,000 jobs per month to keep up with growth in the working-age population.
A stable unemployment rate could keep the Federal Reserve sidelined through the end of Fed Chair Jerome Powell’s term in May, they said. The U.S. central bank last month left its benchmark overnight interest rate in the 3.50%-3.75% range.
Economists said it was too early to blame artificial intelligence for the labor market stagnation, though the AI spending boom was taking away money that could have been invested in increasing head count. Trade policy continued to be a drag on the labor market, they said, nodding to Trump’s threat last month of additional tariffs on European allies for rebuffing his demands for the U.S. to buy Greenland.
Though Trump abruptly backed down, he also said he was putting Venezuela under temporary American control after the U.S. captured President Nicolas Maduro, adding another layer of uncertainty.
“I have been on the road talking a lot recently, and I’ve spoken to a lot of companies, and they said that the uncertainty is a big part,” Hetrick said. “The reason why they say it’s a big part is because their input costs keep changing. So every time a tariff changes, they have to recalibrate their input costs for the things that they’re making.”
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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