I hope that all of you have had a nice start to the year despite a lot of cold and snow hitting most of the country so far. As we move deeper into 2026, the initial economic data is trickling in, and it’s providing a confusing and somewhat contradictory map of where we are headed.
The most recent report from the Bureau of Labor Statistics shows employment rose by 130,000 (versus an expectation of roughly 70,000 [1]) in January, with the unemployment rate declining to 4.3%[2]. This would suggest a fairly strong start to the year and a healthy job market in terms of job growth. Unfortunately, we also got a better picture of how 2025’s job market fared with revisions that pushed payroll employment down by more than 400,000 jobs, which means only 181,000 jobs added the entire year[3].
Interest rates and yields are in part influenced by where the Fed sets the target Federal Funds rate. The Fed also works on the dual mandate of seeking price stability and full employment. Given the mixed signal in the labor market, it muddies the picture they are seeing and makes rate change decisions more difficult this year. While a hotter than expected job market suggests an economy that is in decent shape, revisions to the 2025 numbers suggest the labor market’s foundation is more fragile than believed. Lower employment numbers don’t necessarily mean things are stagnating though. There is an argument that in a lower immigration environment, the labor market doesn’t need to create as many jobs to be considered stable. That combined with an aging population could suggest lower jobs numbers going forward could be the new normal with a breakeven employment growth number closer to 50,000 than the 150,000 in January 2024[4].
One thing I have read about that is worth paying attention to is the growth in nonresidential construction attributed to data centers. While that sector does seem to be adding jobs, with over 30,000 in January, it is important to note that construction of data centers often doesn’t lead to many jobs inside the data centers. This means they aren’t necessarily helping local economies. An article compared a giant, expensive data center buildout to eventually have the same number of employees of an Olive Garden on the low end[5]. These projects are capital-intensive—creating economic growth and construction jobs up-front—but they may even be a detriment later due to higher local electricity costs and minimal permanent payroll. With AI helping to crowd out entry-level white-collar work[6] and the US Manufacturing industry focusing on automation and smart manufacturing initiatives[7], it is reasonable to think that job growth may be hindered by the proliferation and adoption of AI.
In 2026 and beyond, jobs numbers may continue to be a bit unclear in what the data is saying about the economy and the future of work. We are likely in a new era where the monthly report often fails to tell the real story.
[1] https://www.foxbusiness.com/economy/us-jobs-report-january-2026
[2] https://www.bls.gov/news.release/empsit.nr0.htm
[3] https://www.hiringlab.org/2026/02/11/january-2026-jobs-report/
[4] https://www.kansascityfed.org/research/economic-bulletin/declining-immigration-and-an-aging-population-are-reducing-breakeven-employment-growth/#:~:text=The%20second%20is%20the%20recent,maintain%20a%20stable%20unemployment%20rate.
[5] https://ohiorivervalleyinstitute.org/why-data-centers-will-be-economic-development-duds/#:~:text=Based%20on%20all%20of%20this,the%20number%20of%20staff%20and
[6] https://www.axios.com/2025/05/28/ai-jobs-white-collar-unemployment-anthropic
[7] https://www.deloitte.com/us/en/insights/industry/manufacturing-industrial-products/manufacturing-industry-outlook.html
