The first monthly jobs report of Donald Trump’s second presidency is likely to confirm that he inherited a solid economy.
The U.S. labor market probably started 2025 the way it spent most of last year: Generating decent, but unspectacular, job growth.
When the January employment figures are released by the Labor Department on Friday, economists surveyed by FactSet predict that there will be an addition of 170,000 jobs by companies, government agencies, and nonprofits. This number represents a slight decline from the monthly average of 186,000 new jobs in 2024, which included a significant spike of 256,000 jobs in December. Despite this decrease, the unemployment rate is expected to hold steady at a low 4.1%.
The initial jobs report of Donald Trump’s second term is anticipated to validate that he took over a robust economy. This economy is characterized by job security for consumers, along with increasing wages that provide them with the confidence and financial stability to engage in discretionary spending.
“The economy is kicking off 2025 in good shape,’’ said Bill Adams, chief economist at Comerica Bank.
Although a federal judge recently halted President Donald Trump’s initiative to incentivize federal workers to leave their positions, a federal hiring freeze that was implemented by Trump on January 20 is viewed as detrimental to employment growth. Bradley Saunders, an economist at Capital Economics, expressed in a recent commentary that the hiring freeze could have negative implications on employment figures. Since the freeze was put into effect after the collection of January job data, its impact will be reflected in the forthcoming employment statistics.
Likewise, a cold snap that probably increased seasonal layoffs in the Midwest and Northeast occurred late in January and won’t register in government jobs data until the February numbers come out, Saunders wrote.
Economists are also worried about Trump’s threat to wage a trade war against other countries. He’s already imposed a 10% tax on imports from China.
Canada and Mexico – America’s two largest trading partners — remain in his crosshairs though he gave them a 30-day reprieve from the 25% tariffs he was planning to sock them with on Tuesday, allowing time for negotiations. Trump says that America’s two neighbors and allies haven’t done enough to stem the flow of undocumented immigrants and fentanyl into the United States. Trump is also itching to slap tariffs on the European Union; pointing to America’s deficit in the trade of goods with the EU, which came to $236 billion last year, he says that Europe treats U.S. exporters unfairly.
The tariffs, which are paid by U.S. importers who generally try to pass along the cost to customers, could rekindle inflation – which has fallen from the four-decade high it reached in mid-2022 but is still stuck above the Fed’s 2% target. If the tariffs push prices higher, the Fed may cancel or postpone the two interest-rate cuts it had forecast for this year. And that would be bad for economic growth and job creation.
The job market has already cooled from the red-hot days of 2021-2023. American payrolls increased by 2.2 million last year, down from 3 million in 2023, 4.5 million in 2022 and a record 7.2 million in 2021 as the economy roared back from COVID-19 lockdowns. The Labor Department also reports that employers are posting fewer jobs. Monthly job openings have tumbled from a record 12.2 million in March 2022, to 7.6 million in December – still a decent number by historical standards.
As the labor market cools, American workers are losing confidence in their ability to find better pay or working conditions by changing jobs. The number of people quitting has fallen from a record 4.5 million near the height of the hiring boom in April 2022, to December’s 3.2 million, which is below pre-pandemic levels.
Still, layoffs remain below pre-pandemic levels, creating an unusual situation: If you are employed, you probably enjoy job security. If you’re looking for one, things have gotten tougher.
The Labor Department is also expected to report annually released revisions Friday that will show job creation from April 2023 through March 2024 wasn’t as strong as originally reported.
A preliminary version of the revisions, released in August, showed that 818,000 fewer jobs were created over those 12 months – lowering average monthly hiring during that span from 242,000 to 174,000. Because they are not final, the August estimates have not yet been added to the official government payroll numbers. The revisions out Friday will become official and part of the historic data.
