Labor Market Loses Momentum

Evidence of a cooling labor market continues to build, while national home price forecasts show upward momentum. Here’s a look at the key highlights.

·       Government Shutdown Delays Crucial Jobs Data

·       January Private Payrolls Disappoint After Weak 2025 Hiring

·       Broader Indicators Signal Cooling Labor Conditions

·       Signs of Strength in Today’s Housing Market

Government Shutdown Delays Crucial Jobs Data

Although the government has reopened, the brief shutdown pushed back the Bureau of Labor Statistics’ January Jobs Report. Originally scheduled for February 6, it will now be released on February 11.

January Private Payrolls Disappoint After Weak 2025 Hiring

The private sector added just 22,000 jobs in January, according to ADP – less than half of the 48,000 expected. Hiring was flat at small businesses, while medium-sized firms drove gains with 41,000 jobs. Large employers, by contrast, cut 18,000 jobs.

Job growth was uneven across industries. Four of ten sectors lost jobs, and three saw only modest gains. Education and health services led with a 74,000-job increase, while business and professional services shed 57,000 jobs.

Wage growth continues to favor job switchers, with pay rising 6.4% year over year, compared with 4.5% for workers who stayed in their roles.

What’s the bottom line? Private payroll growth remains weak. ADP noted that just 398,000 jobs were added in 2025, well below the 771,000 added in 2024. That puts average monthly job growth last year at roughly 33,000, underscoring a clear slowdown in hiring momentum.

Plus, those 2025 figures could be revised even lower once updated Quarterly Census of Employment and Wages (QCEW) numbers are released for the second half of last year.

Broader Indicators Signal Cooling Labor Conditions

The softness seen in ADP is not an outlier. Revelio Labs reported 13,300 job losses in January in their non-farm payroll release. Their results gained prominence during last fall’s government shutdown, when official BLS data was delayed.

Unemployment claims also point to cooling conditions. Initial jobless claims rose by 22,000 to 231,000, the highest level since early December, while continuing claims increased by 25,000 to 1.844 million. Continuing claims have remained elevated for an extended period, suggesting unemployed workers are taking longer to find new opportunities.

Labor demand is weakening as well. Job openings fell to 6.54 million in December from 6.93 million in November and remain far below the 2022 peak of more than 12 million. Because some remote roles are posted across multiple states, the true number of available jobs may be even lower.

Layoff and hiring announcements further underscore the slowdown. Challenger, Gray & Christmas reported 108,435 job cut announcements in January – the highest January total since 2009 and triple the amount seen in December. At the same time, hiring announcements fell to just 5,306, the lowest January reading since Challenger began tracking hiring plans seventeen years ago.

What’s the bottom line? Elevated unemployment claims, fewer job openings, rising layoffs, and subdued hiring plans all reinforce the view that the labor market is steadily cooling.

Signs of Strength in Today’s Housing Market

Cotality’s latest Home Price Insights report shows home values dipped just 0.2% in December. Even with this modest monthly pullback, prices are still 0.9% higher than a year ago, reflecting only a slight slowdown from November’s 1% annual gain.

What’s the bottom line? The bigger picture remains positive. Cotality now forecasts home values will rise 4.5% over the next 12 months, up from their prior 4.3% projection. This improved outlook likely reflects expectations for easing mortgage rates and continued pent-up buyer demand.

Real estate also remains one of the most reliable vehicles for long-term wealth creation. For example, a $500,000 home appreciating at 4% annually would gain $20,000 in value over just one year – highlighting the meaningful return potential that homeownership can offer.