Data released on Wednesday by the US Bureau of Labor Statistics showed that nonfarm payrolls increased by 130,000 in January, well above economists' expectations. The unemployment rate edged down to 4.3 percent from 4.4 percent, marking the lowest level since August 2025.

US President Donald Trump praised the latest figures on his Truth Social platform and renewed his campaign for the Federal Reserve to lower rates, writing that the United States has again become "the strongest country in the world" and therefore deserves to pay "the lowest interest rates."

Despite solid headline numbers, however, concerns persist about the durability of the labor market recovery. Mark Zandi, chief economist at Moody's Analytics, warned that the job market remains "fragile and highly vulnerable."

"Yes, payroll employment increased by 130,000 in January," he said, "but given the big downward revisions to history, there has been no job growth since last April."

The report included benchmark revisions that reduced total job growth for 2025 from an initially reported 584,000 to 181,000, a substantial adjustment that suggests last year's labor market was weaker than previously assessed.

Zandi also noted that nearly all January job gains came from the healthcare sector, which he said does not necessarily signal broad-based strength in the overall economy.

Earlier in January, Federal Reserve Governor Michelle Bowman cautioned that "beneath the surface, the labor market is fragile." She pointed out that while the unemployment rate has remained near 4.4 percent, it is still higher than mid-2025 levels. Private-sector job gains have averaged roughly 30,000 per month, well below the pace needed to keep unemployment stable.

"History tells us that the labor market can appear to be stable right up until it isn't," Bowman said.

Diane Swonk, chief economist at KPMG, echoed similar concerns. "The underlying pressures in the labor market are greater than what the overall unemployment rate suggests," she said. Wage growth is cooling, and it is becoming harder for unemployed individuals and recent graduates to secure jobs. "Despite the strong economic data on paper, this remains a frozen labor market."

Separate reports indicate that US manufacturing employment has remained under pressure following tariff increases imposed by the Trump administration. Analysts say trade policies contributed to job losses in subsequent months. 

San Francisco Federal Reserve President Mary Daly described the labor market as being in a "low-hiring, low-firing" but fragile state, suggesting the Fed may need to consider further rate cuts. The federal funds rate currently stands at 3.5 percent to 3.75 percent, while inflation remains above the Fed's 2 percent target, complicating the policy outlook.

While January's data exceeded expectations, the debate continues over the true condition of the US labor market. Falling unemployment and job gains point to economic resilience, yet concentrated hiring, significant data revisions and continued pressure on manufacturing have led some analysts to question the sustainability of employment growth.

With inflation yet to fully return to target and interest rates still elevated, the Fed faces limited policy flexibility. The trajectory of the labor market will not only shape the outlook for US economic growth but also influence the path of future monetary policy. Markets are closely watching whether structural shifts beneath the surface of strong headline data will become more evident in the months ahead.

(Cover via VCG)