Establishment Survey Payrolls/Hours Worked (CES)

The BLS revised job growth estimates for mid-2023 through mid-2024, confirming employment expansion was slower than initially reported. Meanwhile, as part of its routine adjustments, the BLS revised November and December figures upward smoothing the series back on its trend after incorporating more comprehensive Quarterly Census of Employment and Wages (QCEW) data up to mid-year 2024. For January 2025, payroll gains missed expectations coming in at only 143,000 while hours slumped and the average workweek tumbled to just 34.1, lowest since March 2020. Job gains were concentrated in health care (+44,000), retail trade (+34,000), and social assistance (+22,000), while mining, quarrying, and oil and gas extraction saw declines (-8,000). Government employment continued trending upward (+32,000), with little change in other major industries.

Interpretation

The latest CES payroll report primarily reflects significant revisions rather than major new developments. While these statistical adjustments aim to provide a more accurate picture of employment trends, they also highlight the complexities of interpreting short-term fluctuations in job growth. The revisions indicate that the labor market may not have been as strong in 2023 as previously thought, and the upward adjustments to late 2024 data serve to smooth out inconsistencies rather than signal a sudden surge in hiring.

After all that, the January estimate fell short of expectations for the first time in several months. At 143,000, it wasn’t terrible especially following the combined 100,000 upward revisions in November and December – leaving us to wonder why those were raised and why so much given hours.

One of the most telling indicators in this report is the continued decline in average weekly hours worked. Hours have been on a downward trajectory for some time, with a more pronounced drop recently. This suggests that while employment numbers may still be rising, the composition of jobs is shifting and not for the better. Businesses appear to be relying more on part-time hires or reducing hours for full-time employees rather than expanding their workforce aggressively. This aligns with broader labor market trends, where anecdotal evidence and other data sources suggest firms are being cautious in their hiring and labor allocation strategies.

The decline in hours worked is a critical signal of underlying economic conditions. When businesses cut hours instead of laying off workers, it often reflects an attempt to adjust to slowing demand without making drastic employment reductions, exactly as one would expect for a slowing labor market or worse.

Taken together, the revised payroll data and declining hours suggest that while the labor market remains relatively stable, its strength has indeed been significantly overstated. The contradiction with hours implies the payroll numbers are still overestimated even after their revisions (and therefore smoothing the final two months of last year rather than some legitimate rebound in jobs).