Hiring in January blew past expectations, signaling that the labor market could be picking up — and likely dashing hopes for an interest rate cut at the Federal Reserve’s meeting next month.

US employers added 130,000 jobs in January – a rapid pickup in pace from December and far exceeding expectations of 55,000 jobs, the Bureau of Labor Statistics said Wednesday.

The unemployment rate ticked down slightly to 4.3%, from 4.4% the previous month.

Annual revisions erased 1.2 million jobs off the past two years, revealing much weaker growth than initially reported.

US employers added just 181,000 jobs last year, down from initial estimates of 584,000. In 2024, the country produced 1.2 million jobs in 2024, not 2 million, according to the Labor Department.

The report – which was delayed from Friday due to a partial government shutdown – is the first hint into this year’s labor market, after 2025 marked the slowest year for job growth since 2009 not counting 2020 during the pandemic.

However, January’s data could be somewhat misleading since retailers did not hire as many seasonal workers during the 2025 holiday season – so reported layoffs could be smaller and make the headline figure appear larger than usual. 

The upbeat jobs report follows months of murky labor market data, as initial unemployment claims remain low from week to week, but job openings plummeted to 6.5 million in December – the lowest level since September 2020.

“January gives us an early view of a labor market that is settling into a more stable pattern after a year of recalibration,” Ger Doyle, North America president at ManpowerGroup, a workforce solutions firm, said in a note Wednesday.

Health care and social assistance saw the largest job gains, adding 82,000 and 42,000 jobs, respectively.

Another 33,000 jobs were added in the construction sector in January.

Federal employment continued to fall in the aftermath of Elon Musk’s Department of Government Efficiency, a cost-cutting White House committee that slashed foreign aid and axed thousands of government jobs. 

The federal government sector lost 34,000 jobs in January. Since reaching a peak in October 2024, federal employment is down by 327,000, or 10.9%, according to the BLS.

In a positive sign for the labor market, the labor force participation rate for those aged 25 to 54 – considered prime working years – jumped to 84.1%, its highest level since 2001.

“Today’s report reinforces a theme we’ve seen before: the labor market is not collapsing, but it is not roaring either,” Mark Malek, chief investment officer at Siebert Financial, said in a note Wednesday.

“It’s hanging in there – and in this environment, hanging in there is enough to keep the Fed patient and the markets recalculating.”

Policymakers held interest rates in the current 3.5% to 3.75% range in January, and are expected to maintain a “wait-and-see” approach at their next meeting in March.

“Just in: GREAT JOBS NUMBERS, FAR GREATER THAN EXPECTED!” President Trump wrote in a Truth Social post Wednesday morning. “We are again the strongest Country in the World, and should therefore be paying the LOWEST INTEREST RATE, by far.”

The Fed is now awaiting January inflation data slated for release Friday. For much of last year, central bankers weighed whether to prioritize stubbornly high inflation or underlying weakness in the labor market.

In the meantime, Americans have adopted a slightly less weary outlook on the economy after months of heightened anxiety. 

Consumer sentiment hit 57.3 in February – its highest level since last August, according to the University of Michigan’s survey. But the figure is still near historic lows and far below last February’s 64.7 reading.