Will ‘Choppy’ Hiring, Low Firing Prompt More Job Hugging?

The Federal Reserve has its work cut out for it figuring out this job market.

Bureau of Labor Statistics data released Friday showed 50,000 jobs added in December, fewer than economists had expected. That caps off the worst year for hiring since 2020. While unemployment ticked down to 4.4% from a revised 4.5% in November, figures overall point to continued weakness for a labor market that spent most of 2025 in a “low-fire, low-hire” state. 

What does that mean for employment? The data is “a good representation of what I think the market will look like for 2026,” characterized by choppy hiring and weak overall labor force growth, but relatively low layoff numbers, says Ross Mayfield, investment strategist at Baird. Last month, JPMorgan’s research team predicted “uncomfortably slow growth in the labor market” in the first half of 2026, which will reverse later in the year. 

Labor Productivity

Come Jan. 28, the Fed has to decide what the state of the labor market means for monetary policy. While the central bank cut interest rates three times at the end of last year, minutes from the Dec. 9-10 meeting show that policymakers are divided about whether the sluggish labor market or inflation is a bigger threat to the economy, and how much to lower rates in 2026. 

Some experts say investors may be overestimating the likelihood of further decreases: 

• The market is “too optimistic about the Federal Reserve’s ability to cut rates this year,” Dennis Follmer, chief investment officer at Montis Financial, wrote in a statement shared with The Daily Upside. 
• “Though Fed leadership is firmly focused on arresting any additional labor market weakness, this print should provide ammunition for the hawks advocating for more of a focus on inflation and a pause at the January meeting, which we now think will occur,” Christopher Hodge, chief US economist at Natixis, told Morningstar after the December jobs numbers were reported.  

AI Effect? Labor productivity climbed in the third quarter to its strongest pace in two years, but while roughly 18% of firms in the US say they’ve used artificial intelligence in the past two weeks, it’s unclear yet if that’s causing the productivity boom, Bloomberg reports.