Finally, Some Good News on US Jobs

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

1:02Bloomberg Audio Studios. Podcasts. Radio. News. The headline is, the labor market appears to be stabilizing. Today, the Bureau of Labor Statistics came out with one of the year's most anticipated data dumps, a report on hiring and firing in January, and a revision of the jobs numbers from last year. Molly Smith, a Bloomberg U.S. economy editor, says that heading into today, economists' expectations had been low. We keep seeing these huge job cut announcements coming out of big companies, and that seems to be making a lot of big news and making people really anxious about the job market. But you get a report like this, and it's like, well, there was a lot of really positive things that happened.

1:48The U.S. economy added 130 ,000 jobs last month, according to the BLS report. Far more than economists were projecting. And the unemployment rate actually dropped, to 4.3 percent. The takeaway? The 2026 labor market could be stronger than we thought. To see the way that the January numbers came in, not just the beat in hiring, but also the drop in the unemployment rate, which was not expected, really just showed that the labor market seems to be gaining its footing. But Molly says the other takeaway is that the labor market of 2025 five was weaker than originally reported. The pace of hiring originally last year was around 49 ,000 jobs added per month on average.

2:34The revisions today show that was just 15 ,000. In the world of economics, that's basically nothing. So that's really not a great number. The Federal Reserve will be weighing all these numbers as it sets rates in the months ahead. And Molly says the odds are now looking better that it will stay the course. for the Fed. This means that they're fairly justified in holding interest rates right now. You know, there really is no rush to cut interest rates when you have an economy, a job market that seems to be studying the way that it is. And it looked like, in hindsight, that the time that the cuts that they already made were fairly well-timed.

3:14I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, the U.S. labor market shows signs of stabilizing after a really slow year. What today's jobs numbers mean for job seekers, employers, and the Fed.

3:34So let's talk about what the report revealed about the state of the labor market right now. Those January numbers. Where are the bright spots and where are there areas of concern in the January jobs report? So I guess you could call this a bright spot, but also an area of concern was that health care continues to dominate hiring. It actually had like the most amount of jobs added since 2020. And health care dominated hiring last year, too, really was the majority of all job growth. Ideally, you'd want to see more breadth of hiring and seeing this across more industries. There were some other industries, though, that did add jobs, manufacturing notably, first time in a long time that we saw job gains there.

4:15We saw federal government continue to cut jobs, not really surprising. That's more or less the industry breakdown. Looking to some other positive aspects, we also get another survey in the jobs report that is a survey of households that showed that more people voluntarily quit their jobs, which usually is a sign that you feel pretty confident in your ability to find a new one. That number has been pretty low for the most part. You know, people feel fairly insecure, don't really think this is a good time to, you know, just up and leave your job. Right. The big freeze, right? Exactly. That's what people were talking about.

4:48People too afraid to leave their jobs. That seems to be changing. Perhaps. I mean, you know, another thing economists will always tell you is only one month of data. But if sustained, that could be a sign that maybe things are turning. You saw far less people reported that they're working part time for economic reasons. So that's something that had been climbing. Also a sign, you know, of some financial distress. So that was positive to see that fall. And one of the other things that was on people's minds heading into this jobs report were these headline grabbing layoffs. Amazon announced it would be cutting about 16 ,000 jobs in January.

5:20The Washington Post, also owned by Amazon founder Jeff Bezos, fired more than 300 journalists. How are those layoffs showing up in the job market right now? And are there signs of some industries contracting or were these kind of outliers? It's hard to reconcile the two because you see these announcements of layoffs from these big companies. You mentioned Amazon, UPS was another. And they haven't really translated into actual layoffs in the aggregate for the most part. One thing to note is that announcements are simply announcements. They're not necessarily meaning that people are going to be fired right then and there.

6:00Of course, at the post, they unfortunately were. But in a lot of these other companies, that can be spread out for months, you know, when those actual layoffs might happen. So even though we have had a lot of these announcements, they haven't in the data shown up as far as actual layoffs will go. Yeah, that's really helpful. So those kinds of announcements could show up in, you know, a March report or an April report. Or they might not show up at all. Maybe it was an announcement that was, you know, at one point in January. Who knows, maybe things changed and they weren't actually enacted. When you look back over decades, job creation has often been tied to a growing economy, right?

6:38Is the dynamic any different now, given the growth of AI, worries that AI is coming for Americans' jobs? Should these numbers be viewed through a different lens at all? I mean, obviously, we had a great report today. But I think in general, it's absolutely fair to say that, you know, the labor market has absolutely slowed down from, you know, those post-pandemic peaks. And that we have seen one that has been gradually cooling now for a number of years. Today's does not change that. And it's difficult to then reconcile that with what has been really strong GDP numbers, that you see an economy that is expanding at some of the fastest paces in years, yet the labor market has been fairly slow.

7:20The reason why you can look at those things is because the way that GDP is actually calculated has nothing to do with the job market, which is also why it's a difficult way to measure the U.S. economy. So the economy has been growing as fast as it is in the last few quarters, largely because of a reversal in trade policy. You know that there had been such a huge rush at the beginning of 2025 to import as much as companies could ahead of those expected tariffs that did come in April. And the way that GDP is calculated, that would then add to growth when you don't have import activity as strong, all else equal.

8:00So that's been a lot of what's been keeping GDP so elevated. And that's why it's hard to then look at the job market next to that and see how the two compare. Well, I also want to look closer at some of the revisions. Annual revisions are released every January. The report we got today showed that last year's job market was weaker than originally reported. How much weaker and how do we know? So this is where it gets also there's just so many layers to this. There's a few different kinds of revisions that BLS carries out. There's one that was the main headline revision. We call it the benchmark revision.

8:37And that has to do with basically incorporating a more accurate but less timely employment series that is based on actual like unemployment insurance records. So that's it just has a bit of a lag. It's a quarterly series. So that one updated payrolls through March of 2025. And then there's another set of revisions that updates how BLS accounts for businesses that open and close the net number between those two that impacts the rest of 2025, as well as, you know, a model that then influenced payrolls beyond that. And then there's also an adjustment of how BLS factors for seasonal adjustment factors.

9:14So all those things combined, it's a lot going on. I think the easiest way to think about this is that over the course of 2025, the average pace of monthly job growth was now 15 ,000 versus initially reported 49 ,000. That essentially incorporates all of the revisions together. And I think that's the easiest way to think about it. How does that stack up historically? How should we think about that number? How low is that? It's low. I mean, it's like I'm trying to that's essentially like the same as like there really was no hiring. Like that's what we would call anemic, you know, undynamic, barely chugging along.

9:55Like there was like not really a whole lot happening. Molly, you've walked us through all the different kinds of revisions that we're looking at in conversation right now. Can you remind us why these revisions happen every year? What new information does the BLS incorporate in this data? Right. So the big one is what I had referred to as that series that is more accurate but less timely. It's called the Quarterly Census of Employment and Wages, QCEW for short. And that is really what a lot of people would say is probably like one of the more accurate series of employment that we get. You know, this is just how statistics work and that if you want to balance speed and accuracy, you have to accept that as you get more data, that numbers are going to be different.

10:42And that's just a tradeoff that you have to be comfortable with. You want to see the first Friday of the following month what the jobs number was. People don't have the patience to wait longer for when more data will come in. So if you're going to demand that kind of speed, you have to then accept that as more data comes in, in subsequent months, quarters, even years, that the numbers are going to be revised. And in time, that does make the numbers more accurate. I mean, that speaks to something else that's significant about this report is that the data is backward looking at this point. So what does it mean for how we should be viewing the labor market today?

11:19That there was, you know, barely chugging along job growth in 2025. What does that mean for 2026? Well, it sets the bar a little low for where we're starting from. That's for sure. But if you look at, say, that now the average pace of monthly job growth in 2025 was 15 ,000 compared to today's number was 130 ,000. Just comparing those two, obviously, there's a lot more going on. That seems like more than stabilizing to me. I mean, that's like a pretty huge surge. I guess we'll know next year how that number is revised. We'll even see next month how that number is revised and the following month.

11:52And again, this happens multiple times. So we'll see how that 130 number sticks. But as it stands today, I think we can say that Powell did have the right idea when he spoke at the January Fed meeting that the labor market does appear to be stabilizing. It's not just the unemployment rate that perhaps hiring, too, is maybe picking up a little bit as well.

12:17So the January jobs report held good signs about the labor market in the year ahead. But with layoffs in the news and affordability a growing concern, how will the public, politicians and the Fed respond? That's next.

12:40This month's sunny jobs report doesn't address Americans' persistent concerns about inflation. and affordability. And it's not likely to diminish the sense of a vibe session, the idea that many people feel like the economy isn't working for them, regardless of what the economic data show. So I asked Bloomberg U.S. economy editor Molly Smith how she reconciles the strong January jobs numbers with people's current perceptions of the labor market. This is what's been really challenging about squaring survey data with what we call hard data and that the surveys are consistently far more negative than what the actual numbers show.

13:22There is a survey that the government conducts that it's a hypothetical. It asks if you had to pay for an emergency$400 expense, could you do it? And that's something that people have tracked for a long time and how that share has declined by and large for a while. But there was another survey provider who actually asked people, did you have an expense and were you able to pay it? Not do you think you can, but were you able to? What actually happened? And by and large, people were able to pay it. So I think some of that just goes to show that people maybe are more resilient than they report to be and will find a way.

13:59You know, we did. The other survey that I always look at is how likely do you think it would be to find another job if you were fired tomorrow. Right. And that number, when it's low, feels really anxiety inducing about the state of the economy. But as you said, you need to kind of match that with the actual odds of finding another job or people's actual success rates in finding a job. Right. Like, did you actually quit your job and try to find another one? Or that's just your case sitting here employed today if you took a guess if you were in that situation. And I think that's where you see a huge divergence in some of these numbers, that's also why the economy as a whole is also still doing really well, that we look at these sentiment surveys particularly for what it means for consumer spending, which you would think based on these surveys that people aren't spending any money at all.

14:48But that's not at all what the actual data suggests and that spending is still holding up really well, as is the overall economy. So, I mean, given the fact that how people feel about the economy really matters politically. I'm wondering what this report means for the Trump administration. Well, he did just tweet or post that, you know, great job numbers today. You know, the golden age is upon us. Everything looks great, which is a little bit of like selective attention, I would say, on his part. He was president all last year. That too. But we had a positive aspect of the report to focus on. I'm not saying that he was wrong to focus on that, but I'm saying it's a little bit selective and maybe excluding the part of where he presided over 2025.

15:32Right, right. I mean, in August, the Bureau of Labor Statistics revised some of its data downward, saying the U.S. economy added fewer jobs than it had previously said. And Trump called the numbers rigged. He fired the BLS commissioner. We talked about it on the podcast. But he hasn't had that kind of reaction this time. Not that I've seen so far. I mean, the day is young. Who knows? There's a lot of positives to take from this. But, you know, for somebody who has been very critical of this data agency, of the revisions that they make, what it says about the labor market as a whole, it seems to be omitting that entire chunk of the equation.

16:06So we're also getting a report on the Consumer Price Index, which measures inflation this Friday. How do today's jobs numbers, which are generally better than expected for January, change how we're going to view those inflation numbers? How are you going to put those two numbers in conversation? Well, something else that we saw in this jobs report today that we get into was wage growth, which was a bit stronger than expected. So, you know, usually that is the real engine, of course, of like consumer spending, of like what your pay is. And to see then how that might factor into demand for goods and services and how that could affect their prices in January, I think that would be the correlation we would look for.

16:46And I mean, a body that will be looking very closely at the CPI data and the jobs data is the Federal Reserve, of course. What is this jobs report mean for the chances that they cut rates in the next meeting? Oh, that was already about zero to say like a cut for March. That wasn't going to happen. Coming into this report, the expectation was more around June for the cut to happen at that meeting. But after today, basically that shows that, again, that like what Powell has been saying, that like policy is well positioned right now. We feel like we're in a good place. We can adjust if needed and that there is no urgency to cut, all of that very much validated today.

17:25You see that the way Trump reacted to the numbers saying that, you know, we had such great job numbers as, you know, we should be playing among the lowest interest rates in the world. It's a little bit more complicated than that, that, you know, if you're seeing the job market grow that the way it is, you wouldn't think you would need lower interest rates to support it. And that's how the Fed is looking at this. In May, we could see a new Fed chair. Kevin Warsh is Trump's pick for the job. Has Warsh responded to these numbers at all? How might this change his thinking? I think it's going to make things very complicated for him.

17:59You know that, again, there's a lot of time between now and May. He also has to be confirmed first. But basically, he took this job with the understanding that the president wants him to cut interest rates. Obviously, it's not just his decision. There's a whole body of policymakers. But certainly, you know, the chair tries to rally a consensus and speaks for the entire central bank. So Trump did say, like, that the understanding of, like, Warsh taking this job is that he's going to cut rates. And, of course, Warsh knows that, too. The whole country knows that. The whole world knows that, that this is what Trump wants.

18:32The numbers make that, again, as we sit here today, a bit more complicated. This doesn't look like an economy right now that is calling for any immediate cut to interest rates.

18:47This is The Big Take from Bloomberg News. I'm Sarah Holder. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. Thanks for listening. We'll be back tomorrow.