WASHINGTON (AP) — The U.S. economy is cracking. So why is the American job market in decline?
The Labor Department will report Wednesday that businesses, government agencies and nonprofits added 75,000 jobs last month, according to a survey of forecasters by data firm FactSet. While this is an improvement from December’s 50,000, it is inconsistent with strong economic growth and far behind the employment boom of just a few years ago.
Additionally, January’s numbers are likely to be overshadowed by Labor Department revisions that will significantly reduce job creation in 2025, and could even wipe out job creation altogether. The weakness in the job market reflects the effects of persistently high interest rates, billionaire Elon Musk’s purge of the federal workforce last year, and uncertainty stemming from President Donald Trump’s erratic trade policies, leaving businesses worried about the economic outlook.
The dire numbers have been released ahead of Wednesday’s report. Employer just posted 6.5 million jobs December was the lowest in the past five years.
Payroll processor ADP reported last week that private employers added 22,000 jobs in January, far less than economists expected. Outplacement firm Challenger, Gray & Christmas also reported that companies cut more than 108,000 jobs last month, the most since October and the worst January job cuts since 2009.
Last month, several well-known companies announced layoffs. UPS is cutting 30,000 work. Chemical giant Dow is moving toward more automation and artificial intelligence. 4,500 cuts work. And Amazon is End 16,000 corporate jobsthe second mass layoff in three months.
The downturn in the job market does not match the performance of the economy.
From July to September, America’s gross domestic product (output of goods and services) grew rapidly at an annual rate of 4.4%, the fastest pace in two years. Private consumption was strong, with increased exports and a decline in imports boosting growth. This was on top of solid 3.8% growth from April to June.
Economists are wondering whether job creation will eventually accelerate to keep up with strong growth, perhaps because President Donald Trump’s tax cuts will lead to huge tax refunds that consumers will start spending this year. But there are other possibilities as well. GDP growth could slow, coinciding with a weak labor market, or advances in AI and automation could cause the economy to grow rapidly without creating many jobs.
Now, according to Labor Department statistics, U.S. employers added 49,000 jobs a month in 2025, compared to 400,000 jobs a month during the 2021-2023 job boom.
But last year’s already lackluster numbers are certain to be significantly lowered on Wednesday, when the government announces annual standards revisions aimed at accounting for more accurate headcounts that employers report to state unemployment offices. Preliminary estimates of the revision, published last September, show that 911,000 jobs could be lost in the year to March 2025. Economists expect Wednesday’s final revision of the index to be slightly smaller.
Making matters even more confusing: The Department of Labor is also revising more recent payroll statistics to reflect more accurate information about the number of businesses opening or closing. Shruti Mishra, U.S. economist at Bank of America, believes these changes will likely reduce job creation by 20,000 to 30,000 per month starting in April 2025. Federal Reserve Chairman Jerome Powell said current numbers may overestimate job creation by 60,000 jobs per month.
Overall, the changes could mean the U.S. economy will actually lose jobs in 2025, the first annual decline since 2020, a year of pandemics and lockdowns, Capital Economics’ Stephen Brown wrote in a commentary.
Bank of America’s Mr. Mishra said in a commentary last week that the unemployment rate provides a more accurate picture of the state of the job market, even as payroll numbers become more uncertain. He expects it to remain low at 4.4% in January.
Despite recent high-profile layoffs, the unemployment rate doesn’t appear to be as dire as the payroll numbers.
That’s partly because President Donald Trump’s immigration crackdown has reduced the number of foreign-born people competing for jobs.
As a result, the number of new jobs the economy needs to create to prevent unemployment from rising, or the “break-even point,” has fallen. The number reached a peak of 250,000 in 2023, when immigrants were pouring into the U.S., said Anton Cheremkin, an economist at the Dallas Fed. Researchers at the Brookings Institution believe the number is now down to 20,000 and could fall even lower.
The combination of weak employment and low unemployment means that most American workers enjoy job security. But people looking for work, especially young people who can compete at entry-level levels in AI and automation, often struggle to find work.
