Economists swore President Donald Trump’s immigration policies would choke off the labor supply and slam the brakes on economic growth. They said baby boomer retirements, deportations, and slower immigration would force the economy into a hard limit. Even Federal Reserve Chairman Jerome Powell leaned on the old theory that when GDP and labor data disagree, the labor market must be right.
Turns out, that “lore” aged like milk.
The economy added 130,000 jobs in January — double what analysts expected. Even better, the private sector added 172,000 jobs while government payrolls fell by 42,000. Growth is accelerating under Trump without importing hundreds of thousands of workers in defiance of immigration law. Imagine that: growth through Americans working, not bureaucratic math tricks.
The Great Reprivatization
Far from slowing the economy, shrinking government appears to be fueling it. Over the past year, federal payrolls have dropped by 324,000 workers, freeing up labor that economists conveniently forgot to include in their models. Treasury Secretary Scott Bessent promised “reprivatization,” and that’s exactly what’s happening.
This is the largest peacetime contraction of federal employment outside the census cycle, comparable only to the post–World War II demobilization when millions shifted from war production back into private enterprise.
Even after revisions, the private sector added 443,000 jobs last year — about 36,900 per month — well above what’s needed to keep the labor market stable. Meanwhile, the federal government shed an average of 27,000 jobs per month. Less bureaucracy, more paychecks. Funny how that works.
Fewer Mouths to Feed, Stronger Wages
Overall job growth was revised downward to 181,000 last year from earlier estimates of 584,000, and critics rushed in to claim the labor market was “far weaker.” That argument is mostly political noise.
The biggest downward revision came in January — President Biden’s final month — which flipped from a reported gain of 111,000 jobs to an actual loss of 49,000. February, March, and April followed with major revisions, while later months looked much closer to initial reports.
An economy adding more jobs than it needs isn’t weak just because growth is slower. With about 300,000 foreign workers leaving the labor force last year, the healthy job-growth rate is naturally lower. Complaining about that is like saying a household is struggling because it buys fewer groceries after family members move out.
Wage data tells the real story. Average hourly earnings rose 3.32 percent last year, beating inflation’s 2.7 percent. Average weekly earnings climbed 3.62 percent. Productivity per worker was revised higher too — quality over quantity in the labor market.
January continued that trend. Weekly wages jumped 0.7 percent. Labor force participation increased, including among prime-age workers. The broad U-6 underemployment rate fell from 8.4 percent to 8.0 percent. Weak? Not even close.
Growth Through Investment, Not Cheap Labor
Strong productivity is driving wage growth. Businesses are investing and innovating instead of relying on an endless stream of low-wage foreign labor. In the third quarter of last year, productivity rose 4.9 percent and GDP jumped 4.4 percent while payroll growth stayed modest. That’s efficiency — not stagnation.
Some point out that January’s job gains were concentrated in healthcare, construction, and professional services. That’s exactly what you’d expect in an economy near full employment, where sectors compete for workers.
Markets noticed. Expectations for near-term interest rate cuts dropped sharply after the report. Investors aren’t worried about labor shortages — they’re recalculating for a stronger, more productive economy than the pessimists predicted.
The bond market got the message before the commentators did. The idea of an economic “speed limit” was always a myth. The real drag on growth was government bloat and dependence on low-skill, low-wage foreign labor. Under Trump, those brakes are coming off — and the economy is proving it can run just fine without them.
