Soft Jobs Data, Slower Home Construction

The labor market continues to show signs of softening, while new home construction lost steam last fall. Here’s a look at the key highlights.

·       Beneath the Surface of December’s Jobs Report

·       Private Payrolls Rebound in December, but Miss Forecasts

·       Broader Data Reinforces a Cooling Labor Market

·       Housing Starts Fall to Pandemic-Era Lows

Beneath the Surface of December’s Jobs Report

December’s Jobs Report from the Bureau of Labor Statistics showed that 50,000 jobs were added – below the expected 73,000. The unemployment rate moved down from 4.5% to 4.4%.

What’s the bottom line? While the headline numbers appear mixed, revisions remain a critical part of the story. October and November payrolls were revised down by a combined 76,000 jobs, and it will be important to see whether December’s already modest gain is also revised lower in the months ahead. In addition, the unemployment rate was revised higher in three different months last year, pointing to more underlying labor market weakness than the initial reports suggested.

Sector details also raise concerns. Most of December’s job gains came from health care and social assistance (+39K jobs) and leisure and hospitality (+47K). Health care hiring tends to be steady and less sensitive to economic conditions, while leisure and hospitality typically sees a seasonal boost in December due to holiday travel. Excluding these sectors, overall job growth would have been negative once again.

Private Payrolls Rebound in December, but Miss Forecasts

After losing 29,000 jobs in November, the private sector added 41,000 jobs in December, according to ADP – slightly below expectations. Small businesses rebounded, adding 9,000 jobs, while medium-sized firms led gains with 34,000. Large employers showed little hiring activity, adding just 2,000 jobs.

Job growth was uneven across industries, with three of ten sectors losing jobs. Education and health services posted the strongest gains (+39,000), followed by leisure and hospitality (+24,000), again likely reflecting seasonal hiring.

Wage growth continues to favor job switchers, with pay up 6.6% year over year compared with 4.4% for workers who stayed in their roles.

What’s the bottom line? December’s rebound in private payrolls offers some short-term relief, but the trend remains weak. The 12-month average stands at 51,000 jobs added per month, compared with just 20,000 over the past three months. Over the last five months, private payrolls have increased by only 27,000 – highlighting a clear slowdown in hiring momentum.

Broader Data Reinforce a Cooling Labor Market

Beyond payrolls, other labor market indicators continue to point to cooling conditions.

Initial jobless claims rose by 8,000 to 208,000, while continuing claims climbed by a larger 56,000 to 1.914 million and have remained elevated for much of the last year. Together, these figures suggest a “low-fire, low-hire” labor market.

Job openings in November also fell more than expected, declining from a downwardly revised 7.45 million in October to 7.15 million. This number may overstate true demand, as many remote roles are posted across multiple states. Meanwhile, the weak hiring rate (3.2%) and low quit rate (2%) point to softer demand for workers and less confidence among employees to switch jobs.

Challenger, Gray & Christmas reported 35,553 job cut announcements in December, the lowest level in 17 months. However, for all of 2025, employers announced 1.2 million job cuts – the seventh-highest annual total since 1989. Hiring announcements were also the lowest year-to-date total since 2010.

What’s the bottom line? Persistently elevated continuing claims, fewer job openings, high annual job cuts, and subdued hiring plans all point to a labor market that is steadily cooling.

Housing Starts Fall to Pandemic-Era Lows

Delayed government data showed Housing Starts declined 4.6% from September to October, hitting their lowest level since the start of the pandemic. Building Permits, an important signal for future construction, also edged down 0.2%.

What’s the bottom line? The housing market still needs more supply to meet demand, but increasing inventory takes time. Builders must move through the full cycle of permitting, construction, and completion before new homes reach the market. If mortgage rates continue to trend lower, renewed buyer demand could once again put upward pressure on home prices.

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