The economy continues to add jobs, even after accounting for a sizable reduction in federal government staffing. In January, 130,000 net new payroll jobs were added, pushing the total to an all-time high of 158.6 million workers. All the while, the federal government staffing is now down by 312,000 from a year ago due to the impact of DOGE.
Though respectable in the latest month, net job additions have been slower over the past year than during a normal economic expansion. Therefore, efforts to boost the labor market would be a strong justification for the Federal Reserve to cut interest rates, but the lingering inflation is holding the Fed back for now.
Construction jobs are at a record high, including those for AI data center construction. More jobs will be required in construction and for general contractors once the housing sector begins to recover. Currently, wage growth in construction and leisure/hospitality (restaurants and hotels) is slightly faster than the national average. These two industries are worth watching, especially given that the southern border crossing is effectively shut down. If more Americans can enter construction jobs and benefit from higher wages (and without student debt), then all good. But if few Americans enter construction, expect labor shortages and delays in home construction.
