Change State Friends,
Greetings from February, a month consistently one of the most hated for being cold, bleak, and occupying a dull, sad space in-between. If you’re feeling this way, take heart—February also marks the Lunar New Year, ushering in the Year of the Snake! 🐍 This year is considered a time for reflection, renewal, transformation, and personal growth. It’s also a time to shed old habits and embrace new beginnings. So, if you failed to keep your New Year’s resolution in January, there’s still hope! Here’s how to decode the year ahead for your own zodiac sign.
As for Change State, our 2025 Talent Acquisition Trends Survey has concluded, and we’re grateful to all who shared their insights. Your insights help us better understand the evolving challenges and opportunities in talent acquisition. Stay tuned for a comprehensive report summarizing the findings.💡
Now, time to check in on the labor market.
“Healthy but unspectacular” was the take on January’s jobs report, with the US adding just 143,000 jobs as unemployment fell to 4% (economists had expected closer to 170,000). The report also saw upward revisions November and December by a combined 100,000 positions. January marks the second-longest streak of jobs growth in US history, and the prime working age employment to population ratio rose to 80.7%. “A lower-than-expected January payrolls number was more than offset by upward revisions to November and December’s totals and a downtick in the unemployment rate […] Those who’d hoped for a soft report that would nudge the Fed back into rate-cutting mode didn’t get it” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
January’s report was anticipated to be somewhat confusing due to planned seasonal revisions and some updated methodologies. Those revisions simultaneously showed that a) the number of US jobs created in 2024 was lower, and b) the number of Americans with a job was higher. The planned annual benchmark revision removed 589,000 created jobs from the economy in 2024 – a revision that’s larger than usual, but not without historical precedent. In March 2019, there was a downward revision of 514,000 jobs during Trump’s first term before the pandemic. Concurrently, the Census Bureau substantially raised its population estimates to reflect the surge in immigration that began in 2021, revealing that there were 2 million more people employed in December than previously recorded.
Why such a massive change? The Census Bureau has faced challenges in fully accounting for the recent surge in immigration. In response, the bureau released new figures using an updated methodology and January’s jobs report was the first to use those new estimates. However, in line with its past practice, the government will not revise any of the historical household survey data. The new population numbers will show up as a huge, one-month increase instead.
According to the employer survey, the US economy had 7.2 million more jobs in December than it did before the pandemic in February 2020, while the household survey showed a gain of only 3.1 million jobs. While the two surveys often show differing trends in the short term, such a large and persistent gap is unusual. The revisions and updated population estimates have narrowed that gap to a more ‘normal’ level.
Revisions aside, January hiring was very narrow. Healthcare, retail, and government combined accounted for 77% of new jobs created last month. “Employers are really maintaining their workforce, but they are not hiring significantly, nor are they laying off,’’ said Gregory Daco, chief economist at EY Parthenon. The job market is showing signs of quieting down, as employers are posting fewer jobs and monthly job openings slid to 7.6 million in December, short of the 7.9 million that economists had projected. Strangely, the BLS reported that wildfires in Southern California and freezing temperatures had ‘no discernible effect’ on payrolls. Yet, the household survey found that 573,000 people missed work due to weather—the highest January figure since 2011.. Employment at restaurants and bars declined by 15,700 jobs, also suggesting that weather events had taken a toll on January’s jobs numbers.
The current hiring rate is at 3.4%, similar to levels seen in 2013-2014, when unemployment was over 7%. As the labor market cools, fewer Americans feel confident about switching jobs: quits have dropped from a record 4.5 million in April 2022 to 3.2 million—below pre-pandemic levels. Simultaneously, more Americans are taking on gig work than ever as people battle against the rising cost of living. New data reveals 5.3% of workers have more than one job – the highest since 2019.
While layoffs remain historically low, economists are closely watching jobless claims for early signs of the impact of the Trump administration’s firings, and initial claims increased by 5,000 to 219,000 last week. Beyond the impact to the federal government, experts anticipate knock on effects as lost positions will primarily be well-paid, highly educated roles, which could affect consumer-facing industries and the housing sector. However, since the layoffs began after February 8th, any impact will likely only show up in the March jobs report.
The Labor Department’s report also highlighted strong wage growth last month, with average hourly earnings surging by the most in five months, which should help sustain consumer spending. Unfortunately, consumer prices also accelerated by the most in nearly 1.5 years in January. The outlook on inflation with the new administration does not look promising, as the World Economic Forum’s survey of chief economists found that 94% of experts expect policy changes will cause inflation to rise.
Indeed, tariffs paid by US importers are often passed on to consumers, and could fuel inflation which remains stubbornly above the Fed’s 2% target. If tariffs nudge prices higher, the Fed may cancel or postpone the two interest-rate cuts previously forecasted for the year.
The Fed’s January meeting minutes were released this week and the summary noted “the effects of potential changes in trade and immigration policy as well as strong consumer demand. Business contacts in a number of Districts had indicated that firms would attempt to pass on to consumers higher input costs arising from potential tariffs”. Fed Chair Jerome Powell has generally declined to speculate on the impact of tariffs, but other experts are sharing their reservations. “Generally, tariffs are going to be inflationary,” remarked Michael Reid, senior US economist at RBC Capital Markets.
Markets currently anticipate the next rate reduction to come in September, though some economists believe that window may have already closed. The Fed seems willing to acknowledge that possibility: “many participants noted that the committee could hold the policy rate at a restrictive level if the economy remained strong and inflation remained elevated.”
“The ball is in Washington’s court and they can either run with it and score a win or they can delay important decisions like those on taxes and immigration that create uncertainty and ultimately lead to less-than-potential economic growth.”
(Sources: Economic Policy Institute, AP News, The Wall Street Journal, CNN, CNBC, The New York Times, Bureau of Labor Statistics, Census.gov, Guy Berger via Substack, Reuters, The Washington Post, Bloomberg, JP Morgan, The Washington Post, World Economic Forum, CME Fedwatch)
What Else for February?
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(Sources: Economic Policy Institute, LinkedIn, MIT Sloan Management Review, Gartner, World Economic Forum, McKinsey Health Institute, ZipRecruiter, Full Stack Recruiter, The Washington Post)
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Copyright © 2025 Charge State. All rights reserved.
