Economic Update: January 2025
A brief overview of the numbers.
Consumer Price Index (CPI) Report - January 2025
The U.S. Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.5% in January 2025, following a 0.4% rise in December 2024. Over the past 12 months, the CPI has risen by 3.1% before seasonal adjustment.
Key Highlights:
Shelter Costs: The shelter index rose by 0.4% in January, contributing significantly to the overall increase in CPI. Over the past year, shelter costs have increased by 4.5%.
Energy Prices: The energy index rose by 1.1% in January, driven by a 1.8% increase in gasoline prices. Despite the monthly rise, energy prices saw a modest 1.2% increase over the past year.
Food Prices: The food index increased by 0.4% in January. Grocery store prices (food at home) rose by 0.5%, while restaurant prices (food away from home) increased by 0.3%. Over the last 12 months, food prices have risen by 2.7%.
Core Inflation: Excluding food and energy, the CPI increased by 0.4% in January and by 3.4% over the past year. Price increases were observed in categories such as motor vehicle insurance, recreation, used cars and trucks, medical care, communication, and airline fares.
Sector-Specific Trends:
Transportation Services: Increased by 1.9% in January, reflecting higher costs for vehicle insurance and airline fares.
Apparel Prices: Declined by 1.3% over the month.
Medical Care: Mixed results were observed, with medical care services remaining stable while medical care commodities increased by 1.3%.
January 2025 Employment and Economic Data Overview
Household Survey Data
The unemployment rate edged down to 3.9% in January, following annual adjustments to the population controls. The number of unemployed people remained relatively stable at 6.7 million.
Among major worker groups, unemployment rates showed little to no change: adult men (3.6%), adult women (3.7%), teenagers (11.7%), Whites (3.4%), Blacks (6.1%), Asians (3.6%), and Hispanics (4.7%).
The number of long-term unemployed (those jobless for 27 weeks or more) remained at 1.3 million, accounting for 20.9% of the unemployed. Meanwhile, the labor force participation rate (62.7%) and employment-population ratio (60.2%) remained unchanged.
The number of people employed part-time for economic reasons held steady at 4.4 million. Additionally, 5.4 million people were not in the labor force but wanted a job, though they were not counted as unemployed due to not actively seeking work.
Establishment Survey Data
Total nonfarm payroll employment increased by 147,000 in January, continuing the trend from 2024, where monthly gains averaged 170,000. The most significant job growth occurred in:
Health care (+45,000 jobs), with hospitals, nursing facilities, and home health care services all seeing gains.
Retail trade (+35,000 jobs), primarily in general merchandise retailers.
Social assistance (+23,000 jobs), led by individual and family services.
Government employment continued its upward trend (+34,000 jobs).
Conversely, the mining, quarrying, and oil and gas extraction sector lost 7,000 jobs. Other industries, including construction, manufacturing, transportation, and financial activities, saw little change.
Average hourly earnings for private nonfarm payroll employees rose by 0.5% in January to $35.92, marking a 4.2% increase over the past year. The average workweek edged down slightly to 34.0 hours.
Revisions to prior months’ data showed an upward adjustment of 102,000 jobs combined for November and December 2024, reflecting additional business reports and seasonal recalculations.
Real Earnings and Inflation Adjustments
For all employees, real average hourly earnings were unchanged from December to January, as a 0.5% increase in average hourly earnings was offset by a 0.5% rise in the Consumer Price Index for All Urban Consumers (CPI-U).
Real average weekly earnings decreased by 0.4% over the month due to the combination of stable real hourly earnings and a 0.4% decline in the average workweek.
Over the past year (January 2024 to January 2025), real average hourly earnings increased 1.1%, while the 0.4% decline in the average workweek resulted in a 0.7% increase in real average weekly earnings.
For production and nonsupervisory employees, real average hourly earnings were also unchanged from December to January, as a 0.5% increase in nominal earnings was offset by a 0.5% increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Real average weekly earnings declined by 0.5% in January due to both stable real hourly earnings and a 0.5% decline in the average workweek.
From January 2024 to January 2025, real average hourly earnings for this group increased 1.2%, and with no change in the average workweek, real average weekly earnings also rose 1.2%.
Economic Growth and GDP
Real gross domestic product (GDP) increased at an annual rate of 2.4% in the fourth quarter of 2024, following a 3.2% increase in the third quarter. The slower growth in Q4 was primarily driven by increased consumer and government spending, partially offset by a decline in investment. Imports, which negatively affect GDP calculations, decreased during this period, contributing slightly to overall growth.
The GDP data indicate continued economic expansion, though at a slower pace compared to the previous quarter. Consumer spending remains a key driver of growth, reflecting stable demand, while government expenditures also played a role in supporting economic activity.
Conclusion
The employment landscape in January 2025 remained stable, with modest job gains and a steady unemployment rate of 3.9%. Wage growth continued, but inflation-adjusted earnings showed no change in the short term, while real weekly earnings declined slightly due to a shorter workweek. Meanwhile, economic growth showed resilience, though at a moderated pace compared to the previous quarter. The data suggests a labor market that remains strong, despite some slowing in broader economic activity.