An era ends

Since Donald Trump’s victory in November, conversations about the US labor market have centered on the impact his potential policies could have. A labor shortage could arise from deportations, which might drive up wage inflation; tariffs could lead companies to slow hiring or lay off workers, which might have the opposite effect.

But the January Employment Situation report, released last week, is arguably more backward-looking than normal because it is essentially the last month of the Biden administration. Outside of the pandemic, Biden’s term was marked by a consistently strong labor market, with solid monthly additions and a steady unemployment rate. That was again the case for January. The economy added 143,000 jobs, and the unemployment rate barely moved, decreasing from 4.1% to 4%. While the former amount is roughly half the size of December’s number, the January additions were close to the 170,000 that many economists had expected and also reflect the post-holiday pullback.

It’s worth noting that annualized hourly wages rose, so some companies already might have been preparing for the shifts Trump might make. The February job’s report will give a better idea of the direction that the labor market might be headed under Trump, though it may take a while for his policies to affect employment.