Payrolls revised down in 2025, rebounded in January

February 11, 2026

Benchmark revisions to payrolls in 2025 reveal that we generated only 181,000 jobs in 2025, or a mere 15,000 per month. The annual benchmark revisions shaved off 862,000 jobs from the level of payrolls between April 2024 and March 2025. That was well within expectations, given changes to the census data released in September 2025. The good news is that the private sector showed signs of a rebound in the fourth quarter, even though net revisions were to the downside for the period.

The largest disruption to the fourth quarter was the record-length government shutdown. Federal workers were paid in arrears but contractors and the communities that relied upon them were not. Temporary layoffs fell as the government ramped back up in December and January.

January rebound

Payrolls added 130,000 new jobs in January, well above market expectations. The private sector accounted for all of those, adding 172,000 new jobs. The public sector continued to shed jobs, mostly at the federal level. Federal payrolls shed 34,000 jobs. Morale is low as baby boomers close to retirement are opting out. State payrolls shrunk but were partially offset by a rise in local hires, outside of education.

Healthcare and social assistance added 123,500 jobs; healthcare alone made up two-thirds of those gains. The rest were in social assistance, which includes everything from daycare to in-home elder care. Professional and business services added 34,000; temporary employment added to that gain, after being a drain on payroll gains during much of 2025. There was a marked turnaround in temporary hires late in 2025 and in January.

Construction added 33,000 jobs, mostly in specialty construction, which is buoyed by the surge in data center construction. Even manufacturing added 5,000 jobs. That is the first gain for manufacturing employment since November 2024. The increase was dominated by an increase in aerospace, which is finally stabilizing after major setbacks in recent years. The backlog of orders for new aircraft extends into the early 2030s.

Heavy manufacturing outside of aircraft added jobs as well, but the overall numbers remain weak. Nondurable goods manufacturing shed jobs. The only increases were in paper, textiles and food.

Leisure and hospitality essentially moved sideways, with a jump in hiring at restaurants offsetting losses elsewhere, including hiring in accommodation. Luxury travel held up in 2025 and early 2026, but economy travel did not. Amusement parks and other forms of entertainment took it on the chin, as most consumers traveled less.

Retail hiring was essentially unchanged. January is the biggest month of the year for retail layoffs. Sure enough, the sector shed 454,000 jobs before seasonal adjustment in January, which came out as essentially unchanged after seasonal adjustment.

The largest private sector job losses occurred in financial, information and transportation, warehousing and storage. Losses in financial and information were concentrated in insurance carriers and telecommunications. The loss in information jobs was the largest since January 2025. What was unusual is that the losses were not as much across the tech behemoths, which had been driving losses in the information sector.

One outlier was motion picture and sound recording, which increased by 13,900. That is the largest monthly increase for the sector since the writers’ strike came to an end in November 2023.

Average hourly earnings rose by 0.4%, buoyed in part by a jump in the minimum wage across 19 states. Downward revisions to late 2025 mean that average hourly earnings increased 3.7% from a year ago, the same as in December. That is down from a 4% annual wage gain in January 2025. The wage gains were greatest for supervisory workers in the service sector, but non-supervisory outperformed in the goods sector. Construction wages posted the most gains, reflecting the skills of specialty contractors needed for data center construction.

The household survey revealed a drop in the unemployment rate to 4.3% in January from 4.4% in December. The U6, or more inclusive measure of unemployment, fell to 8% in January from 8.4% in December. Temporary layoffs continued to drop, along with those forced to accept part- instead of full-time work. That represents a catch-up following the losses associated with the government shutdown in October and the first half of November.

The labor force participation rate rose to 62.5% from 62.4%. The gains were broad-based. The only group to suffer losses was the 16–24-year-olds, suggesting that new graduates are still struggling to get their first jobs. Black and Hispanic men lost ground. Hispanic men have the highest participation rate of any demographic group.

Participation among prime-age women tied the peak hit in August 2024. A jump in hiring in childcare and daycare services helped support those gains. Many states are shifting to universal pre-K, which provides help for working parents. Prime-age men also saw an increase in participation.

The duration of unemployment fell along with the ranks of the long-term unemployed. That suggests that we are finally starting to see some healthy churn in the labor market. Job leavers hit the highest level since 2013 when the economy was still struggling to recover from the global financial crisis.

The next shoe to drop will be recent layoffs, which have soared. Many of those reductions in force will be made through attrition; baby boomers are aging into their peak retirement years.