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Posted February 9, 2026 at 10:15 am
Another government shutdown; another batch of delayed economic data. The most anticipated report last week was the January jobs report, now due out this Wednesday. Our models suggest the economy added 52k jobs in January, although annual revisions may have cut ~1mn jobs from March 2025 payrolls. The unemployment rate likely held steady at 4.4% but could have ticked lower.
The unemployment rate should be the key labor market gauge guiding monetary policy in 2026. A spike in unemployment could prompt more dovish policy. However, Census Bureau (CB) population projections suggest it should remain low. In its 2023 projections of population growth with low immigration, the CB assumed net migration of 389k for the year ended June 2026. The population still grew by 82k monthly in this scenario, but entirely due to growth in the 65+ population. The working age population (18–64) was expected to fall 14k monthly. Updated projections recently cut the net migration estimate to 321k. Reduced immigration disproportionally impacts the supply of working age individuals as ~70% of immigrants fall into this cohort, and fresh estimates imply a 19k monthly decline in the working age population. In turn, the total labor force (16+) could grow by just 35k per month, or 0.02%, in 2026, assuming the participation rate holds at 62.4%. If so, household employment would need to grow just 33k monthly to keep the unemployment rate steady. In 2025, it grew 200k per month.
Even if labor demand remains sluggish, constrained labor supply should cap the unemployment rate. Labor demand might even surge temporarily in 1H26 alongside fiscal stimulus, putting downward pressure on the unemployment rate. This, in turn, should limit Federal Reserve rate cuts to two or fewer over the course of 2026.
Chart of the Week: Source: BLS, Census Bureau, FactSet, J.P. Morgan
Asset Management. Analysis based on 2025 Vintage population
estimates from the Census Bureau and assumes constant labor
force participation rate of 62.4%.
Thought of the week: Source: BLS, Census Bureau, J.P. Morgan Asset
Management.
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