January jobs preview and the brief government shutdown

Trend watch

While Winter Storm Fern was brutally cold and deadly in some areas, most of the disruptions were thankfully short lived. Weekly air passenger counts in the U.S. jumped 10.6% in the past seven days to 14.3 million from 12.9 million a week ago.

Still, there are areas such as northwest Mississippi along with western and central Tennessee that remain impacted, mostly by lingering power outages. For instance, the Oxford campus of the University of Mississippi won’t reopen until Monday, February 9^th. 

Although not storm related, intermodal rail traffic surged 19.4% in January. That helped snap an ugly four-month decline streak for rail freight. 

Our take

As we anticipated, the partial government shutdown was brief, lasting just four days. Moreover, wicked winter weather did extend the shutdown by a day or so.

But the bad news is that the deal to end this shutdown only had a stopgap funding for the Department of Homeland Security (DHS), which was a point of contention for both sides. That means on February 13^th there could be a shutdown of the sprawling law enforcement agency, which includes the Coast Guard, customs, immigration, disaster support, and airport security. 

Alas, the ever-so-brief shutdown has caused a delay in the release of the January jobs report, which includes the monthly change in the number of jobs and the unemployment rate. It will now be released on Wednesday, February 11^th rather than today (February 6^th).

More importantly, we anticipate that payrolls in January increased by about 65,000, up from 50,000 in December. While that’s a modest improvement, it remains rather lackluster compared to historical averages, including the pre-pandemic 3-year average of 177,000 per month.

Likewise, the unemployment rate was 4.4% in December, which was above the pre-pandemic 3-year average of 4.0%, but remains low compared to the historical average of 5.7% since 1948.

Ultimately, multiple labor market indicators – from continuing claims and ADP to job openings and hiring rates (slides 8 and 9, available to clients in full report) – show that the “low hire/low fire” environment persists. 

Bottom line

The U.S. economy remains resilient, but the data is still muddied by the government shutdown, which has created distortions and delays. We likely won’t get a clear read on the economy until late February or early March. Nonetheless, we expect an uptick in U.S. growth to 2.3% in 2026 thanks to four primary drivers – tax incentives for consumers and businesses, marginally lower borrowing costs thanks to Fed easing, steadier trade policy and tariffs, and continued investment in AI and technology spending.