The labor market kicked off 2026 with a bang: Job creation surged, and joblessness ticked down. But 2025 was slower than we thought.

Why it matters: It points to the possibility that 2025 was the low point for job creation and that a more stable environment in January could signal stabilization or even a hiring pickup in the months ahead.

• Still, you would be forgiven for having economic whiplash, after some downbeat indicators leading up to today's report — including plunging job openings in December and sharply negative polling on Americans' perceptions of the job market.

What they're saying: "January's jobs report reads like a race split in two," Glassdoor chief economist Daniel Zhao wrote in a note, noting 2025 revisions that show "a slower jog than we first thought."

• "After a slow start in the first leg, the labor market may be finding its footing now."

The intrigue: The sense of mixed signals was evident in the report itself, with news that employment rose by 130,000 — the biggest monthly gain since December 2024 — coming alongside deep revisions to job growth last year.

• The Bureau of Labor Statistics' annual benchmark revisions, based on more complete tax records, showed that the economy added just 181,000 jobs in 2025, far fewer than the 584,000 initially reported.
• With those revisions, the labor market added a mere 15,000 jobs per month, on average, last year — down from the 49,000 previously estimated.
• In a country with 160 million jobs, that's essentially a halt in net job creation.

Yes, but: Those revisions were well-telegraphed, with top Federal Reserve officials anticipating that last year's growth in jobs was overstated.

• Now the question becomes whether January's job surge was a one-off or is ultimately revised lower — or a sign of a turning point after tariff effects and economic uncertainty held back employers last year.
• That both surveys making up the report — one of households and the other of businesses — point in the direction of stabilization bolsters the case for the latter.

Zoom in: Fed chair Jerome Powell told reporters last month that the unemployment rate "has shown some signs of stabilization," even as his colleague Fed governor Christopher Waller sounded more apocalyptic about the state of the labor market.

• Powell looks right, at least as of last month: The jobless rate ticked down again to 4.3% after recently peaking at 4.5% in November.
• Roughly 81% of prime-age workers — those between 25 and 54 — were employed in January, returning to the peak seen this economic cycle.

The other side: The bigger job gains were concentrated in just a few sectors, a sign that the labor market still hasn't shaken the concerning trend of historically narrow jobs growth.

• In recent years, workers looking for jobs in health care or social assistance have likely had their pick of gigs. Most of the economy's other sectors are barely adding workers at all (and some are shedding them).
• That continued last month: Health care (+82,000) and social assistance (+42,000) accounted for the bulk of last month's gains. The construction sector also added 33,000 jobs.
• Gains elsewhere were muted. Finance, insurance and real estate firms shed 22,000 workers. The federal government shed another 34,000 jobs as workers who accepted resignation offers fell off payrolls.

The bottom line: Narratives about the labor market have rarely been more split, with today's report conflicting with other data that shows hiring trends have remained sluggish, if not worsened.

U.S. budget deficits are set to remain high in the coming decade, the CBO said this morning, as a surge in tariff revenue only partly offsets lost revenue from last year's tax legislation.

Why it matters: The U.S. government is spending much more than it raises, with annual deficits on track to remain near $2 trillion, or 6% of GDP, in the years ahead — even in the absence of a recession, war or other crisis.

• The national debt, in the new CBO forecasts, is on track to rise to 120% of GDP in 2036, from about 100% now.
• That would represent a new all-time high for U.S. debt, which previously peaked at 106% just after World War II.
• That's from the Budget and Economic Outlook, issued by Congress' financial scorekeeper early each year as the regular update of the outlook for U.S. fiscal policy.

By the numbers: The CBO projects a deficit of $1.9 trillion this year, up from $1.8 trillion last year. That amounts to 5.8% of this year's projected GDP, stable from last year.

• Deficits are projected to remain stable as a share of the economy for the coming years, before spiking in the early 2030s, to 6.7% of GDP in 2033, as entitlement spending for retirees soars.

What they're saying: "Our budget projections continue to indicate that the fiscal trajectory is not sustainable," CBO director Phillip L. Swagel said in a statement accompanying the report.

The intrigue: The CBO estimates that the One Big, Beautiful Bill Act, the Trump administration's signature tax law passed last year, will widen cumulative deficits by $4.7 trillion over the next decade.

• It is partly offset by a projection of $3 trillion in additional tariff revenue from President Trump's trade policy.
• The CBO also estimates that lower immigration rates will increase cumulative deficits by half a trillion over the decade.

Zoom in: The costs of servicing the national debt are on track to soar, with annual interest expense reaching $2.1 trillion, or 4.6% of the economy, in 2035, more than double current levels.

• That assumes interest rates remain relatively stable, forecasting a 10-year Treasury yield of 4.3% in 2027 and in subsequent years. (That rate is 4.2% as of this morning.)

Of note: The CBO sees a surge in economic activity in the first half of this year, thanks to the stimulative effects of the tax law and the end of last year's government shutdown. It expects 2.2% GDP growth before the economy settles into a 1.8% growth rate in subsequent years.

• The economic forecasts incorporate an improvement in productivity due to artificial intelligence, but a modest one — amounting to 0.1 percentage point of additional growth per year, increasing overall output by 1% in 2036.