From BLS: Both total nonfarm payroll employment (+50,000) and the unemployment rate (4.4 percent) changed little in December, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in food services and drinking places, health care, and social assistance. Retail trade lost jobs.
Below is the breakdown of the jobs data.
The unemployment rate ticked down in this report, but the bond market didn’t think much of it, as the jobs report missed estimates and we had negative revisions.
Residential construction jobs: Big negative revisions
I am always mindful of revisions to the labor data, and the jobs report showed that this key sector of my economic work, residential construction jobs, which had recovered to new cycle highs in labor, now has a clear downward trend. As you can see in the chart below, this is a labor trigger that happens before a recession. We shall see if this trend sticks because mortgage rates are lower now and the builders’ confidence has improved.
Below is the most recent homebuilder confidence data, which shows a modest pick-up before the last move lower in rates. It will be interesting to see where this is in two months when we’ll have lower rates in the system and we might have more demand stimulus for the builders.
We got the recent housing starts data on Friday, too, and it showed a pick-up in housing permits from the recent lows. This can be attributed to the lower mortgage rates that we saw in the second half of 2025.
Jobless claims data still low
Since late 2022, I have cautioned people not to talk about a recession until jobless claims data on the four-week moving average heads toward 323,000. On this week’s unemployment claims report, the headline number is still low — we don’t see a lot of hiring or firing.
Conclusion
This jobs report didn’t rattle the bond market, as we didn’t see much movement with the 10-year yield. Also, every jobs report in 2026 is closer and closer to the day Jerome Powell leaves his position as Fed Chairman. In fact, we should get a lot of news about the Fed and housing policy soon, so the market will be adjusting to that news.
For me, labor is still key for mortgage rates. This is why the jobless claims data and the unemployment rate will be two very key data lines in 2026 since we have already had a few rate cuts in the system and we’re getting closer to the end of the rate-cut cycle as long as the labor market doesn’t break. Mortgage rates got closer to the bottom end of the 2026 housing forecast range of 5.75% and we closed the week off at 6.06%.
