US Jobs Report Signals Slowing Growth

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•  09 Jan 2026
 

The latest US jobs report delivered a clear message to traders and investors: hiring is slowing, wages are still rising, and interest rates remain the market’s main compass. December added just 50,000 new jobs, far below past averages, while the unemployment rate held steady at 4.4%. Almost immediately, attention shifted away from the headline number and toward Treasury yields, the dollar, and expectations for Federal Reserve policy.

Hourly wages rose 0.3% to $37.02, pushing annual wage growth to 3.8%. This figure sits at the heart of market thinking. For investors trying to read inflation trends, wages matter more than raw job creation. That is why equity futures moved only slightly higher after the release. The reaction felt measured, not optimistic. The 10-year Treasury yield stayed near 4.2%, reinforcing the idea that markets are positioning carefully rather than betting on a fast rate cut.

Looking deeper into the labor market shows why confidence remains fragile. Labor force participation stayed at 62.4% and the employment-to-population ratio remained at 59.7%, suggesting surface-level stability. But beneath that, more workers are accepting reduced hours and part-time roles. About 5.3 million people are now working part time for economic reasons, nearly one million more than a year ago. These workers want full-time jobs but cannot find them, a sign that demand for labor is cooling.

Another overlooked signal is the growing number of people outside the labor force who still want work. Roughly 6.2 million Americans say they want a job but are not counted as unemployed because they are not actively searching. For long-term investors, this matters because it points to hidden slack in the economy that does not show up in the headline unemployment rate.

Long-term unemployment is also rising. Around 1.9 million people are now classified as long-term unemployed, accounting for 26% of total unemployment. This suggests that once workers lose a job, it is taking longer to find a new one. Historically, this pattern appears when economic momentum is slowing but before a sharp downturn becomes visible.

Sector data paints a mixed picture. Restaurants and bars added 27,000 jobs in December, continuing a steady trend seen throughout the year. Healthcare employment rose by 21,000 jobs, mainly in hospitals, though the pace has slowed compared with 2024. Social assistance services added 17,000 jobs, reflecting ongoing demand for family and community support.

Retail told a different story. The sector lost 25,000 jobs in December, with notable declines in warehouse clubs, supercenters, and food and beverage stores. For traders watching consumer strength, retail employment is an early signal. Fewer retail jobs often point to softer consumer spending ahead.

Wage growth combined with fewer hours worked adds another layer of complexity. Average weekly hours slipped to 34.2, while manufacturing hours also declined. Companies often reduce hours before cutting jobs outright, making this an important leading indicator. For markets, it suggests caution rather than crisis.

Revisions to previous months reinforced the slowdown narrative. October and November job gains were revised lower by a combined 76,000 positions. When viewed across the full year, the shift is striking. In 2025, the US economy added just 584,000 jobs, an average of about 49,000 per month. In 2024, monthly job growth averaged more than 160,000. This sharp deceleration is what bond markets are reacting to most.

Market response flowed directly through rates. Futures on the $SPX, $NDX, and $DJI moved modestly higher, reflecting relief that the data did not point to overheating. The 10-year yield edged toward 4.18%, a reminder that even small yield changes still shape equity valuations, especially for growth and technology stocks. Banks and other rate-sensitive sectors reacted more to yield curve dynamics than to headline numbers. The dollar remained relatively stable, reinforcing the sense of balance rather than stress.

This jobs report fits a familiar pattern. The labor market is cooling, but not enough to force rapid rate cuts. Wage growth is easing but not disappearing. Growth is slowing but not breaking. This is why markets feel tense and range-bound, with positioning driven more by yields than by economic headlines.

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