Outlook The release of the October 2025 trade data on January 8, 2026, has reached somewhat of a milestone. The U.S. trade deficit narrowed to $29.4 billion, a 39% decline from September and the lowest level recorded since June 2009.1 Combined with recent estimates indicating approximately $300 billion in tariff revenues, comprised of customs duties and related taxes, in 2025, these developments should provide a boost to year-end economic growth, particularly 4q2025 Gross Domestic Product.2 While the latest jobs reports were somewhat softer3 and consumer sentiment remains very low4, we continue to view the overall economic backdrop as relatively healthy. Consumer spending remains robust5, unemployment levels remain low6, and household debt levels continue to decline7. Taken together, these factors support a constructive environment for continued earnings growth. . . . The U.S. equity markets navigated an eventful week shaped by economic data releases and geopolitical developments. The capture of Venezuelan leader Nicolás Maduro triggered a brief spike in oil prices as traders weighed potential supply disruptions. However, prices quickly stabilized, reflecting the reality of global oversupply and Venezuela’s compromised infrastructure, which limits near-term production changes. Beyond geopolitical headlines, market sentiment was influenced by mixed labor market data and broader economic indicators. Notably, the new year delivered the first relatively clean U.S. nonfarm payrolls report since the government shutdown. Labor Market Overview Recent labor market updates painted a mixed picture: - Job Openings: Fell in November 2025, missing expectations.8
- Job Cuts: Dropped in December 2025 to their lowest level since July 2024.9
- Private Sector Employment (ADP): Rebounded in December (+41K) but fell short of consensus (+49K).10
- Nonfarm Payrolls: December added +50K jobs, below November’s downwardly revised +56K and expectations of +66K.11
- Unemployment Rate: Declined to 4.4%, slightly better than the 4.5% forecast.
- Wages: Average hourly earnings rose 0.3% month-over-month (in line with expectations) and 3.8% year-over-year (0.2% above expectations).
Downward revisions to the two prior months totaled -76K, bringing 2025’s average monthly payroll gains to +49K—well below the +168K average in 2024. Overall, the labor market reflects an environment where companies remain cautious, slow to hire and slow to fire. While job growth has clearly decelerated, households continue to show employment gains, unemployment remains near historic lows, and wages are trending higher. Implications for Monetary Policy Despite labor market softness, the broader economy appears resilient. The Atlanta Fed’s GDP tracker estimates fourth-quarter growth at an annualized rate of 5.4%, up from 4.3% in Q3.12 Corporate reports also point to strong holiday consumer spending13, which accounts for roughly two-thirds of GDP. On the inflation front, December CPI is expected to show headline and core inflation at 2.7% year-over-year—above the Fed’s 2.0% target but without signs of significant upward pressure from factors like tariffs. This likely provides some reassurance to policymakers. Against this backdrop, the Federal Reserve is expected to maintain its current stance. Markets anticipate rates will remain steady following three cuts in late 2025, with the next reduction not priced in until June. Consensus points to one or two additional cuts in 2026.14
[1] https://finance.yahoo.com/news/buckle-cnbc-anchor-shocked-us-215900943.html [2] https://budgetmodel.wharton.upenn.edu/ [3] https://www.aol.com/articles/private-employers-add-41-000-144036122.html [4] https://www.aol.com/articles/private-employers-add-41-000-144036122.html [5] https://fred.stlouisfed.org/graph/?g=1Ju2q [6] https://fred.stlouisfed.org/series/UNRATE [7] https://fred.stlouisfed.org/graph/?g=1MY6T [8] Job Openings and Labor Turnover Survey News Release - 2025 M11 Results [9] Challenger-Report-December-2025.pdf [10] ADP® Employment Report [11] Employment Situation Summary - 2025 M13 Results [12] GDPNow - Federal Reserve Bank of Atlanta [13] Adobe: Holiday Shopping Season Drove a Record $257.8 Billion Online with Consumers Embracing Generative AI Tools [14] FedWatch - CME Group | 
