Fewer Jobs, More AI, and Markets That Don’t Care (Yet)

For the week ended 1/10/26.

Just over a week into 2026 and things are already getting spicy – the good kind, not the heartburn kind.

Let’s start with the labor market. Employers added a rather underwhelming 50,000 jobs in December, well below economists’ expectations of 73,000 (shocking, I know). The silver lining? The unemployment rate slipped to 4.4%, down from 4.5% in November and 4.6% in October. Directionally, that’s good news, though worth noting unemployment sat at a tidy 4.0% just a year ago.

Zoom out and the bigger picture is harder to ignore. Total job creation in 2025 came in at just 584,000, a far cry from the roughly 2 million jobs added in 2024. That’s not a rounding error – that’s a regime change. Eye-popping? Yes. Comforting? Not remotely. The job market isn’t broken, but it is fragile, and businesses are clearly in no rush to hire.

Why the hesitation? Pick your poison.

First, uncertainty. Firms don’t hire when they can’t forecast costs, especially with tariff talk bouncing around like a ping-pong ball and persistent labor shortages in key sectors. Immigration dynamics haven’t helped.

Second, productivity via AI. As companies increasingly realize they can do more with fewer people, the hiring math gets brutally simple. This isn’t theoretical anymore – it’s showing up in payrolls.

And third, don’t overlook the public sector. Federal government employment is down roughly 277,000 jobs, a nearly 9% reduction in the workforce. That alone takes a noticeable bite out of aggregate employment.

One more macro note before we hit the markets: last week delivered a wave of PMI (Purchasing Managers’ Index) readings, and for the most part they came in weaker than both prior levels and expectations. Not recessionary – but certainly not something to ignore as you sip your morning brew.

So how did markets take all this?

Surprisingly well. The first full week of 2026 brought broad-based gains. Bonds – both domestic and foreign – rose about 40 basis points, while U.S. stocks gained 1.6% and foreign stocks added 1.8%. Commodities led the pack, up 2.5%, reminding us once again that inflation hedges never really go out of style.

Crypto? Pure theater. Down 1.0% on the week, yet magically up 3.0% year-to-date if you sneak in one extra trading day. Volatility remains the only consistent feature of that “asset class.”

Looking ahead, all eyes turn to Tuesday’s CPI release. Consensus expects a total snooze – with year-over-year inflation holding steady at 2.7%. If that’s wrong? Keep your hands inside the vehicle and your seatbelt fastened.

And with that, here’s hoping you have a productive week – and that the snow finally decides to show up in Colorado’s high country. It’s been missing in action so far this season… much like robust job creation.

Good morning. 

Interesting data point of the week.

Source: Visual Capitalist

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