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US OUTLOOK/OPINION: Unemployment Rate Seen Holding Pullback From Recent High

US OUTLOOK/OPINION
USBulletMarketsFixed Income BulletsForeign Exchange BulletsNorth America
  • The unemployment rate should continue to offer a good gauge of labor market conditions with the caveat that we’ll need to watch for any impact from the aforementioned population control adjustments (which will only affect the rate if there are large differences in new population estimates going towards employed vs unemployed).
  • Consensus is heavily centered around a repeat of 4.1% after it surprised lower in December with 4.09%, pulling back from a cycle high of 4.23% in November with technically its lowest rate since June. The median FOMC member in December saw 4.2% in 4Q24 (it almost undershot with an average 4.15%) before 4.3% in 4Q25.
  • The participation rate meanwhile is seen holding at 62.5% in January as it consolidates a decline first seen in November following a pullback in prime-age participation.
  • Looking at broader trends, labor force growth should continue to slow over time considering the pullback in border encounters since President Biden’s executive order tightening the southern border back in June. This decline, with nationwide borders down an average 53% Y/Y in 2H24 comes before any of President Trump’s deportation pledges take effect. 
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  • The unemployment rate should continue to offer a good gauge of labor market conditions with the caveat that we’ll need to watch for any impact from the aforementioned population control adjustments (which will only affect the rate if there are large differences in new population estimates going towards employed vs unemployed).
  • Consensus is heavily centered around a repeat of 4.1% after it surprised lower in December with 4.09%, pulling back from a cycle high of 4.23% in November with technically its lowest rate since June. The median FOMC member in December saw 4.2% in 4Q24 (it almost undershot with an average 4.15%) before 4.3% in 4Q25.
  • The participation rate meanwhile is seen holding at 62.5% in January as it consolidates a decline first seen in November following a pullback in prime-age participation.
  • Looking at broader trends, labor force growth should continue to slow over time considering the pullback in border encounters since President Biden’s executive order tightening the southern border back in June. This decline, with nationwide borders down an average 53% Y/Y in 2H24 comes before any of President Trump’s deportation pledges take effect. 
image