Jobs Cool, CPI Steady, March Cut Back in Focus

The December jobs report capped a striking slowdown in US hiring. Employers added 50,000 jobs in December and just 584,000 jobs in 2025, down sharply from 2 million in 2024, a reset from the post-pandemic surge that made the Fed’s inflation fight so hard. The unemployment rate ticked down to 4.4%, but the broader story is weak job creation and a labor market that is losing breadth.

Why it matters now. Investors increasingly view the data as a green light for a spring rate cut. Seeking Alpha’s rate-cut in March framing echoes what many desks are now leaning toward: slower job growth reduces pressure on the Federal Reserve to keep policy restrictive. That said, the report is not “all clear.” Wage growth is still described as outpacing inflation, supporting consumer spending even as hiring cools, which is exactly the mix that can keep inflation sticky.

The “who” behind the slowdown is less about layoffs and more about fewer openings and fewer hires. CNBC cited a hiring rate of 3.2% in November and a rising share of long-term unemployed. Long-term unemployment share hit 26% of unemployed workers in December. Job growth has also become narrowly concentrated. Health care accounted for roughly 69% of all 2025 job growth, leaving other sectors feeling like recession even if the topline does not scream it.

Readers should treat March as “live,” but not locked. If hiring stays weak while inflation cools, the Fed has cover to cut. If wages and services inflation stay hot, the Fed may signal patience even with a soft labor backdrop.

Equities are starting 2026 with a simple narrative: slower inflation plus easier policy equals higher multiples. Yahoo Finance highlighted expectations that CPI inflation stays near 2.7% YoY and that “inflation will surprise to the downside” in 2026, supporting the idea that Fed cuts can arrive without a growth scare. CPI at 2.7% is the key near-term checkpoint markets are trading around.

At the index level, expectations remain upbeat. The Motley Fool compiled Wall Street’s 2026 targets with an average implied gain of about 10% from early-January levels. In that same snapshot, the S&P 500 was around 6,966, reflecting how much optimism is already baked in after a powerful run. S&P near 6,966 is a reminder that “good news” has to stay good to keep upside smooth.

The catalyst beneath the optimism is twofold:

• Lower yields if the Fed cuts. That supports housing, capex, and the discount rate used for growth stocks.
• Policy tailwinds like accelerated investment incentives. Yahoo pointed to the OBBB’s 100% depreciation for qualifying capex, which can pull spending into 2026. That’s a sharp turn from last quarter’s corporate caution.

But the market is juggling a contradiction: weaker hiring is good for cuts, yet bad for earnings breadth. December payrolls were just 50,000, and 2025 job growth totaled 584,000, which suggests demand may cool further. Add ongoing tariff uncertainty, and investors may remain selective rather than indiscriminately bullish.

Positioning takeaway. The base case can still be “risk-on,” but expect a choppier tape around CPI and Fed communication. If inflation data cooperates, upside broadening beyond megacaps becomes more plausible.

Tariffs did not hit consumers as hard as many feared, but they appear to have hit hiring harder. CNN argued that while some import prices rose, overall inflation stayed relatively contained, while the labor market weakened across 2025. Unemployment rose to 4.4% and average monthly job gains were among the weakest outside recession years. The “where” is broad: manufacturing, logistics, and trade-exposed sectors feel it first, then caution spreads.

The why is uncertainty. Companies have often absorbed tariff costs instead of passing them through to consumers, which dampens CPI but squeezes margins and makes new investments harder to underwrite. CNN described businesses pausing hiring plans amid shifting tariff levels and unclear next steps. That is how you get slower job creation without an obvious wave of layoffs.

Policy risk is now concentrated at the Supreme Court. Fortune reported Moody’s Analytics chief economist Mark Zandi’s view that a ruling could come “any day now” on the administration’s use of IEEPA authority, and that striking down the reciprocal tariffs would be the fastest way to revive job growth. The same report cited manufacturing down 70,000 jobs since April and emphasized that without health care and social services, payrolls might have fallen. Manufacturing down 70,000 is the kind of sector signal that can ripple into earnings and local labor markets.

Next steps depend on the ruling and the administration’s response. Even if the court limits IEEPA tariffs, other tariff tools remain, and any replacement regime would likely roll out more slowly. For investors and operators, that means volatility risk remains: a sudden tariff rollback could improve sentiment quickly, while a reaffirmation could keep capex and hiring cautious into midyear.

Reader takeaway. Treat tariffs as a labor-market variable as much as a price variable. Watch the Supreme Court timing and how quickly businesses shift from “wait-and-see” back to ordering, investing, and hiring.

• Next CPI print. Markets are anchored to the idea inflation holds near 2.7% YoY and continues easing.
• Labor-market breadth. Track whether health care keeps carrying hiring after it drove roughly 69% of 2025 job gains.
• Fed meeting messaging. Any signal that March is “live” could reprice yields and extend the risk rally.
• Tariff legal risk. Watch the Supreme Court tariff decision timeline and potential refund mechanics.
• Long-term unemployment. The 26% share is a warning sign for consumer resilience if it keeps rising.