After a volatile 2025, the job market has started 2026 with some much-needed strength.
U.S. employers added a surprisingly strong 130,000 jobs in December (see the chart), topping expectations of just 75,000 new jobs and pushing the unemployment rate down to 4.3% from 4.4%. This was the job market’s best month-over-month performance since December 2024.
Note, too, that payrolls’ three-month moving average (the yellow line in the chart) has been climbing – smoothing out monthly volatility and revealing a positive longer-term trend.
This latest jobs report is the fourth in a row to be delayed by a government shutdown. That led to a rare instance last week in which updates to payrolls, retail sales, and inflation were all released during the same five-day period. As a result, we also learned that real (inflation-adjusted) average weekly earnings were 1.9% higher than a year ago—their biggest increase since March 2021.
The upshot: The job market appears to be stabilizing after a period of uncertainty, and workers’ wages overall are growing faster than inflation—putting extra money in many consumers’ pockets. That spending power could grow in the coming months if the government’s One Big Beautiful Bill results in larger tax refunds for taxpayers.
All of that adds up to a nice tailwind for the U.S. economy going forward.
Authored by Mike Dickson, CFA
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