The Bureau of Labor Statistics has released its January 2026 Report, showing a labor market that opened the year with modest job growth and a slightly lower unemployment rate. Hiring remains concentrated in essential service sectors, while overall employment momentum continues to move at a slower, more measured pace.
Here’s what the latest data tells us about the labor market:
The great news is:
Healthcare continues to lead:
Health care added 82,000 jobs, with gains in ambulatory services, hospitals, and nursing/residential care. The sector remains one of the most reliable sources of job growth.
Social assistance and construction gained ground:
Social assistance added 42,000 jobs, mainly in individual and family services. Construction rose by 33,000, driven by nonresidential specialty trade contractors.
Wages are still rising:
Average hourly earnings increased $0.15 to $37.17 in January and are up 3.7% year over year, supporting household income stability.
The good news is:
Unemployment remains steady:
The unemployment rate held at 4.3%, with 7.4 million people unemployed.
Participation is holding firm:
The labor force participation rate remained at 62.5%, and the employment-population ratio stayed at 59.8%.
Underemployment declined month over month:
The number of people working part-time for economic reasons fell by 453,000 to 4.9 million, though it remains 410,000 higher than a year ago, indicating continued pressure on full-time job availability.
Fewer people outside the labor force who want a job:
The number of individuals not in the labor force who currently want a job decreased by 399,000 to 5.8 million, suggesting some improvement in labor market attachment.
The bad news is:
Overall hiring momentum remains subdued:
While January’s gain of 130,000 is an improvement from late 2025 levels, payroll employment in 2025 averaged only +15,000 per month, underscoring how much hiring has cooled compared to prior years.
Long-term unemployment remains elevated:
The number of people unemployed for 27 weeks or more held at 1.8 million, but is up by 386,000 over the year. Long-term unemployed workers now account for 25% of all unemployed individuals.
Federal government employment continues to decline:
Federal government employment fell by 34,000 in January. Since peaking in October 2024, federal employment is down 327,000 (10.9%), largely tied to deferred resignations and restructuring.
Financial activities lost jobs:
Financial activities employment declined by 22,000, including an 11,000-job loss in insurance carriers and related activities, a notable signal for firms within that space.
Final Takeaway
The January 2026 jobs report reinforces a labor market that is stable, but operating with reduced momentum. For employers, this environment makes intentional hiring more important than ever. With slower overall job growth and a growing pool of cautious, selective candidates, success in 2026 will hinge less on filling seats quickly and more on making the right hires, improving retention, and ensuring strong role fit in a competitive but cooling labor market.