The U.S. labor market started 2025 on a softer note, with employers adding 143,000 jobs in January, according to the latest Bureau of Labor Statistics (BLS) report. The unemployment rate edged down to 4.0%, marking an eight-month low. While the report shows a slowdown in hiring, major revisions to prior months added 100,000 more jobs than previously reported, reinforcing the overall resilience of the job market.
Construction employment remained steady despite weather-related disruptions and ongoing labor shortages, a key factor as the industry faces policy uncertainty in the months ahead.
Key Takeaways from the Report
- Mixed Signals in Job Growth: January’s job gains fell short of economists’ expectations of 169,000. This is a notable decline from December’s upwardly revised 307,000 jobs. CNN’s Matt Egan explained on News Central that the slowing was not entirely surprising but was still “worse than we thought,” pacing slower than the “gangbusters” growth rate of late 2024. However, November’s employment gains were revised up from 212,000 to 261,000, and December’s from 256,000 to 307,000, reflecting a stronger labor market at the end of 2024.
- Unemployment Rate Drops: The unemployment rate declined slightly from 4.1% to 4.0%, even as labor force participation remained stable at 62.6%. This marks 49 consecutive months of job growth, making it the second-longest streak on record. Notably, Chief Economist at KPMG Diane Swonk told CNN Newsroom that the participation rate for prime-age men increased, as disasters tend to affect women more because they still bear the most responsibility for primary caretaker roles. January also saw the highest number of sickouts since January 2022, according to Swonk.
- Wage Growth Holds Strong: Average hourly earnings increased by 4.1% year over year, nudging up from a prior estimate of 3.9% and outpacing inflation, which remains a positive sign for workers. “The longer it happens, the better people will feel about prices,” said Egan.
- Weather and Natural Disasters Had No Measurable Effect: Severe winter storms and the catastrophic Los Angeles fires were expected to impact labor market activity. However, the Bureau of Labor Statistics stated in a special note released with the official report that these disruptions had “no discernible effect” on payroll numbers, earnings, or hours worked. Swonk noted that while BLS often says disasters don’t dramatically affect numbers, looking “under the hood” suggests hundreds of thousands of workers were unable to get to work because of impacts of the fires or the winter storms, particularly in leisure and hospitality.
- Revisions Indicate Weaker Job Gains: The government revised down total job gains for 2024, showing an average of 166,000 jobs per month instead of 186,000, indicating a less robust hiring pace than initially believed. A downward revision of 598,000 jobs for March 2024 means the economy added an average of 50,000 fewer jobs per month from April 2023 to March 2024. Kevin Hassett, Director of the National Economic Council, called Egan’s analysis on CNN News Central “rosy” and emphasized the significance of these revisions, saying, “We lost a million jobs that voters before the election were told were there.”
Construction Industry: A Stable but Cautious Outlook
While construction employment remained steady in January, broader factors could shape the industry’s trajectory in the coming months. Historically, construction hiring is sensitive to interest rates, material costs and labor availability.
- Weather-Related Disruptions: Despite the BLS special note, construction was one of the industries most affected by extreme winter conditions, limiting job site activity and potentially slowing short-term hiring.
- Wages Remain Strong: The average hourly wage in construction increased to $38.95, with an average workweek of 38.8 hours, resulting in weekly earnings of $1,511 — 23% higher than the private-sector average.
- Labor Shortages Persist: The Associated Builders and Contractors (ABC) estimates the industry will need to attract 439,000 new workers in 2025 to meet demand, driven by infrastructure projects, data center expansions and rebuilding efforts from recent natural disasters.
Policy Uncertainty and Potential Impacts on Construction
With President Donald Trump back in office, several policy shifts could significantly impact the construction industry:
- Tariffs and Material Costs: Proposed tariffs on Canada, Mexico and China could increase costs for imported materials like steel and lumber, impacting project budgets and timelines. Economists warn that “steep tariffs and policy uncertainty could push businesses to increasingly adopt wait-and-see behaviors and pull back on hiring as they navigate higher input costs and retaliatory measures.”
- Immigration Policy Changes: Stricter immigration controls could exacerbate construction labor shortages, as the industry relies heavily on immigrant workers. Trump’s plan to deport millions of immigrants who lack permanent legal status is already underway and could drive up labor costs.
- Regulatory Changes and Tax Policy: The administration’s push for tax cuts and deregulation has sparked optimism among business leaders, with some expecting hiring to accelerate later in the year. However, the uncertainty surrounding these policies continues to create market volatility, with economists estimating that GDP could contract by 1.5% in 2025 depending on the extent of tariff implementations.
Looking Ahead: Challenges and Opportunities
Despite slowing job growth, the labor market remains historically resilient. “The labor market is looking pretty solid, but we’re going to have to take this report with the context that it might be less clear as to what’s going on exactly,” said Cory Stahle, an economist at the jobs site Indeed. Additionally, paychecks are outpacing inflation, with wages increasing 4.1% year over year, which Egan called “a good sign for workers” and demonstrates continued demand.
For the construction sector, the coming months will require close monitoring of policy developments and economic shifts. Rising material costs, labor shortages and potential changes to interest rates could all influence hiring and project pipelines. Industry leaders should proactively address workforce challenges and adapt to evolving economic conditions.
The next employment report, scheduled for March 7, 2025, will provide further insight into whether January’s slowdown was a temporary dip or the start of a broader trend.
Analysis and commentary in this report is up-to-date as of Feb. 7, 2025, 10:15 a.m. EST. Please check the news sources linked in this article for any updates occurring after that time.
