Early 2026 starts with a familiar tension. Growth has held up, but hiring momentum has been inconsistent since mid-2025. New private payroll data suggests the labor market may be stabilizing rather than rolling over, even as markets look to the Federal Reserve for the next rate move.
According to the ADP National Employment Report, private employers added 41,000 jobs in December after a revised -29,000 in November. Pay growth stayed sticky. Job-stayer pay rose 4.4% year over year, while job-changer pay accelerated to 6.6%, a reminder that wage pressures have not fully cooled.
That mix matters for markets because it nudges the Fed into its “muddled middle”. Cooling but not collapsing employment reduces urgency for near-term cuts, while pay growth keeps inflation risks alive. Job openings data for November showed openings down 303,000 and the openings rate at 4.3%, reinforcing a low-hire, low-fire equilibrium where it is tough to land a job but layoffs remain contained.
Investors also have to price policy risk. A possible Supreme Court ruling on unilateral tariff authority and looming Fed leadership changes could quickly reprice yields if markets sense the central bank’s independence is weakening. Fed Chair Jerome Powell’s term ends in May 2026, and the selection process is already influencing expectations for the path of rates and inflation credibility.
Positioning for 2026 should prioritize resilience. Treat “steady jobs plus sticky wages” as the base case until Friday’s government payrolls either confirms stabilization or reopens recession fears.
