We have a K-shaped job market, too

A solid jobs report masks a lot of problems workers see up close

Key takeaways: 😉

• Overall job growth was strong in January.

• But most of the gains came in health care and social services.

• Six of eleven sectors have lost jobs during the last 12 months.

• Trump’s tariffs are depressing employment.

• The job market has weakened considerably under Trump.

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At the risk of torturing the metaphor, the job market is now settling into a K-shaped bifurcation similar to the overall economy. Parts of the job market are booming, while other parts are stagnant. And aggregate numbers that sound pretty good mask problems a lot of workers can see plainly.

The employment numbers for January are good, overall. Employers created 130,000 new jobs, double what economists were expecting. The unemployment rate dipped slightly, from 4.4% to 4.3%.

But almost all of the January job growth was in health care and social services. There was a modest bump in construction jobs, probably related to the boom in artificial-intelligence data centers. In most other sectors, job growth is flat or declining.

“If I just looked at the headline jobs figure, I’d think the labor market is humming,” economist Peter Boockvar of One Point BFG Wealth Partners wrote in a February 11 analysis. “But if I look under the hood, I see that just about all the job growth is still coming from healthcare/social assistance with some lift too in construction. The rest of the economy is reflecting this highly unusual and highly uneven business activity situation.”

[The “sell America” trade is looking pretty good.]

There’s nothing wrong with health care or social service jobs. But in a solid economy, there would be job growth in most sectors. There isn’t. The following chart shows the 12-month change in employment for 11 broad sectors. In six of those eleven industries, employment has declined during the past year.

This data correlates with President Trump’s first year in office. And there have been three notable changes during the last 12 months, compared with the one-year period prior to that.

The first big change in the job market under Trump is the huge loss in government jobs, stemming from the so-called DOGE commission that Trump appointed last year to slash the federal bureaucracy. Government payrolls have declined by 256,000 jobs during the last year.

[Who’s up and down in the K-shaped economy]

That has fueled a huge slowdown in total job growth. Total employment grew by 1.2 million jobs during the 12-month period ending in January 2025. That slowed to just 359,000 new jobs during the last 12 months. The swing in government jobs was 673,000 jobs, accounting for three-quarters of the slowdown. The gain in health care jobs during the last year has slowed from the previous year, accounting for most of the rest of the recent shortfall.

The last big difference under Trump is an outsized decline of 195,000 jobs in trade, transportation and utilities, a sector directly exposed to the higher costs caused by Trump’s tariffs on trillions of dollars of imports from most trading partners. Employment is also falling in retail, information, business services and manufacturing. Tariffs may be a factor in all of those industries, as businesses buffeted by Trump’s erratic trade policies put hiring and expansion plans on hold until the environment seems more predictable.

Sectors least affected by tariffs are where job growth is the strongest, meanwhile. Health care and social services are largely domestic. Leisure and hospitality are service industries with minimal exposure to the higher cost of imported goods.

Trump is crowing about the overall job gains in January, with the White House proclaiming that “the numbers shattered expectations (again).” But consumer surveys show Americans are deeply worried about the job market, a big reason overall confidence is at recessionary levels. The numbers Trump is overjoyed about tell us something. But not everything.