January Hiring Surge Defies Forecasts as Unemployment Rate Dips

2026-02-11 economy

Washington, Wednesday, 11 February 2026.
Defying grim forecasts of just 55,000, the U.S. economy added 130,000 jobs in January, lowering unemployment to 4.3 percent and bolstering the case for stable interest rates.

A Resilient Start After Delays

The release of the January jobs report, delayed until Wednesday due to the partial government shutdown that ended on February 3, has delivered a surprising jolt of optimism to a wary economic landscape [1]. As we previously analyzed in “Delayed Labor Data and Retail Earnings Take Center Stage,” expectations were modest, with forecasts centering on 80,000 new roles [7]. However, the Bureau of Labor Statistics (BLS) reported that the U.S. economy added 130,000 nonfarm payrolls in January, more than doubling the Dow Jones consensus estimate of 55,000 [1][3]. This surge was accompanied by a decline in the unemployment rate to 4.3 percent, defying projections that it would hold steady at 4.4 percent [1][6].

Private Sector Leads While Government Shrinks

The headline number masks a significant divergence between the public and private sectors. Private payrolls demonstrated robust health, growing by 172,000 positions, which handily beat the LSEG estimate of 70,000 [6]. Conversely, the government sector acted as a drag on the total, shedding 42,000 jobs [6]. This contraction in the public workforce aligns with recent trends; federal government jobs specifically fell by 34,000 in January, contributing to a broader decline of 327,000 federal roles since the peak in October 2024 [1][6].

2025 Revisions Reveal Stagnation

While January’s data suggests a strong start to 2026, the report included sobering benchmark revisions that rewrite the economic narrative of the previous year. The BLS revised the total jobs added in 2025 down to just 181,000, a staggering drop of -87.603 percent compared to the 1.46 million jobs created in 2024 [2]. These revisions indicate that the labor market effectively stalled last year, with the economy contracting during four specific months: January, June, August, and October of 2025 [2]. This retrospective weakness provides critical context for the current “surge,” suggesting that the January 2026 gain may be a stabilization following a period of near-zero growth, rather than a sign of overheating [1].

Monetary Policy Outlook

The unexpected strength of the January data has immediate implications for the Federal Reserve. Following the release, markets rallied, and traders adjusted their expectations regarding interest rates [1]. The CME FedWatch tool now indicates a 94.1 percent probability that the Fed will keep rates unchanged at its March meeting, a significant increase from the 79.9 percent probability priced in just days prior [6]. Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, noted that the acceleration in employment serves as “vindication for Chair Powell’s holding pattern,” suggesting that the central bank can afford to remain patient as it assesses the economy’s trajectory [6].

Sources

Labor Market Nonfarm Payrolls