What are the Signs Telling Us?
Despite beginning the year under the cloud of a partial federal government shutdown, the U.S. labor market is demonstrating pockets of strength.
The January 2026 labor market report delivered a surprisingly positive start to the year, with job gains significantly exceeding expectations and the unemployment rate declining to 4.3%. The 130,000 jobs added represented the strongest monthly performance since December 2024 and provided welcome relief after an exceptionally weak 2025. A combination of private‑sector insights along with regional intelligence provides a meaningful look at how organizations and workers are dealing with this moment.
Private‑Sector Hiring Shows SteadyPockets of Strength
According to ADP, private employers added 22,000 jobs in January, with the education and health services sector alone contributing 74,000 positions—preventing overall job growth from turning negative. While growth appears modest, there is continued flexibility in industries driven by long‑term demographic needs, including healthcare and specialty services.
Mid‑sized organizations (50–499employees) led January’s job creation, reinforcing what many of our clients are experiencing: employers in this segment continue to move forward with thoughtful hiring where it matters most.
Layoffs Reflect Realignment, NotRetreat
January saw an uptick in announced layoffs—108,435 according to Challenger, Gray &Christmas, the highest January level since 2009. While this number is attention‑grabbing, it’s important to recognize what’s behind it. Many employers set restructuring plans late in 2025, aligning their workforces to better position their organizations for the year ahead. Economic conditions, contract changes and restructuring were among the core drivers. For HR and business leaders, this trend underscores a continued focus on agility. Organizations are not retreating—they are readjusting to secure long‑term competitiveness.
Regional Insights Show Stability andSmart Workforce Planning
The Federal Reserve’s JanuaryBeige Book paints a picture of employment that is “mostly unchanged” across most districts, with eight of 12 reporting flat hiring. Many organizations are focusing on backfilling essential roles and increasing temporary staffing to maintain flexibility amid the uncertainty.
Skilled labor shortages persist infields such as engineering, healthcare and technical trades, signaling continued demand for specialized talent. For employers, this reinforces the importance of recognition, retention and career‑focused engagement strategies that keep critical talent committed for the long term.
Wage Growth Stabilizes at SustainableLevels
Wage growth for job‑stayers remained steady at 4.5% year‑over‑year inJanuary, while growth for job‑changers eased slightly to 6.4%. This steadying brings pay trends back toward pre‑pandemic norms, helping organizations plan compensation strategies with greater predictability. Across several regions, wage growth was strongest in healthcare, where the demand for skilled workers remains high.
A Labor Market in Transition—And an Opportunity to Lead Differently
While some indicators point to cooling in certain areas—such as a decline in job openings to 7.1 million in the latest JOLTS release (DEC)—others highlight resilience and strategic adaptation. Employers are taking precautions, but they’re also making wise decisions about talent.
For HR leaders, moments like this present an opportunity:
- Reinforce culture and connection for teams dealing with change.
- Recognize and reward critical roles that fuel stability and growth.
- Lean into data to focus on the positions and skills that drive lasting impact.
At Engage2Excel, our mission is to help organizations attract, retain and inspire employees—especially as conditions change. January’s labor market story is not one of decline, but of transition. And with the right strategies in place, organizations can turn this period of recalibration into a foundation for stronger workforce engagement in 2026 and beyond.
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Sources:
- Federal Reserve BeigeBook
- ADP National EmploymentReport
- Challenger Gray &Christmas Job Cut Report
- CNBC
- WSJ
- Reuters
- TD Economics
- BLS: JOLTS Nov 2025
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