January 9, 2026

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Payroll employment climbed by 50 thousand in December after having climbed by 56 thousand in October  In the past three months payroll employment has declined on average by 22  thousand per month but that includes the big decline of 173 thousand workers in October as Federal goverrnment workers were laid off.  Employment should rise slowly in the months ahead.

In addition to hiring workers employers can also alter the length of the workweek for their existing workers.  The nonfarm workweek fell 0.1 hour in December to 34.2 hours after having risen 0.1 hour in November.  Prior to the recession the nonfarm workweek was averaging 34.4 hours so it is somewhat lower than it was five years ago.

Uncertainty about tariffs and the availability of immigrant workers has altered hiring decisions to some extent.  Firms in many cases are not replacing a worker that leaves the company and are thereby reducing headcount by attrition.  Firms are also using artificial intelligence to fill some of the need for some types of jobs.  But they are not yet prepared to actually lay off workers as initial unemployment claims (a measure of layoffs) has been fairly steady.  But a number of companies have announced sizeable layoffs in the months ahead so we need to keep an eye on claims to see if it begins to climb.  Thus far, it has held steady.

Job openings have fallen from a record high level of 11.7 million in early 2021 to 7.1 million.  Prior to the recession there were about 7.0 million job openings per month versus 7.1 million currently. Today there are still 0.9 job openings for every unemployed worker which is just slightly lower than where this was prior to the recession.  Employers are nervous and are responding by slowing employment growth via attrition and by shortening the workweek.  The labor market has weakened a bit, but for now it is hoolding rather steady.

Firms are also worried about the availability of immigrant workers.  The border has been essentially closed since February of this year.  Thus, there are far fewer immigrants (both legal and  illegal) crossing the border.

As a result, the labor force was essentially unchanged from January through July .   It was a drop in foreign-born workers that caused the decline while domestic-born workers rose by a roughly comparable amount.  The number of foreign-born workers fell by 1.5 million between March and July.  If we had not deported so many foreign born workers payroll employment in recent months would have been about 200 thousand per month.  It appears to us that the softness in payroll employment in the summer and fall largely reflects a reduction in the number of available workers rather than a shortfall of demand.  In the past two months the foreign born labor force has begun to climb by about 100 thousaned per month.

The change in employment and hours worked are reflected in the aggregate hours index which declined  0.3% in December to 116.9 after rising 0.3% in November.  The aggregate  hours index rose 0.5% in the fourth quarter.  Given a likely sizeable increase in productivity we currently expect GDP growth of 4.3% in the fourth quarter.

Construction employment fell 11 thousand.   Manufacturing employment fell by 8 thousand.  Retail trade jobs declined 25 thousand.  Transportation and warehousing declined 6 thousand.  Info tech jobs were unchanged.  Financial sector jobs rose by 2 thousand.  Professional and business service sector employment declined by 9 thousand.  Health care climbed by 21 thousand.  Jobs in social assistance rose 17 thousand.  Jobs in the leisure and hospitality industry jumped by 47 thousand.  Government jobs rose 13 thousand. (Federal government employment rose 2  thousand in December).

GDP rose 4.3% in the third quarter and we expect 4.3% growth in the fourth quarter.

Stephen Slifer

NumberNomics

Charleston, S.C.