The US labor market showed continued signs of resilience in January as the unemployment rate unexpectedly fell, wages grew more than expected, and December’s monthly job gains were revised higher to show the US labor market exited 2024 on an even better footing than previously reported.

Data from the Bureau of Labor Statistics released Friday showed the unemployment rate fell to 4% in January from 4.1% the month prior. The unemployment rate now sits at its lowest level since May 2024.

The US economy created 143,000 new jobs in January, less than the 170,000 expected by economists and lower than the 307,000 seen in December. But December’s monthly job gains were revised higher from a previous reading of 256,000 and November’s monthly job adds were also altered higher. Across November and December, the US labor market added 100,000 more jobs than initially thought, per Friday’s labor report.

Capital Economics deputy chief North America economist Stephen Brown wrote in a note on Friday morning that the strength in payroll revisions and decline in the unemployment rate “keep the Fed on the sidelines” from cutting interest rates in 2025.

Following Friday’s jobs report, market pricing of the Fed holding interest rates steady through its May meeting moved up to a 67% chance, up from a 61% chance a week ago, per the CME FedWatch Tool.

Read more: Jobs, inflation, and the Fed: How they’re all related

Wage growth, an important measure for gauging inflation pressures also showed signs of strength. Wages rose 4.1% over the prior year in January, up from 3.9% in December and above the 3.8% economists had expected. On a monthly basis, wages increased 0.5%, above the 0.3% seen the prior month. Meanwhile, the labor force participation rate ticked up to 62.6% from 62.5%.

The report shows that “most of the people who want jobs have them, and people who have jobs are getting paid more,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance. He added, the report “doesn’t incentivize” the Fed to change interest rates in the near future.

Recent data has shown the labor market is slowing but not rapidly deteriorating, as layoffs remain low. Largely, economists have argued the recent string of labor market data fits the “broadly stable” labor market narrative Fed Chair Jerome Powell described in his most recent press conference on Jan. 29.

“It’s a low-hiring environment,” Powell said. “So if you have a job, it’s all good. But if you have to find a job, the job-finding rate, the hiring rates have come down.”

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