JPMorgan Projects Labor Market Trends for 2026 Amid Economic Fluctuations
The labor market has exhibited signs of cooling following a tumultuous year characterized by economic and financial upheavals. Predictions from JPMorgan indicate that the onset of 2026 may be sluggish; however, a recovery is anticipated as the year progresses.
In a recent forecast, the bank’s economists attributed the stagnation in job creation during 2025 to the ambiguity surrounding President Donald Trump’s tariff regimes and trade protocols.
“Both short-term and long-term strategic planning for businesses has been impeded, leading to low rates of hiring and layoffs,” stated Michael Feroli, JPMorgan’s chief U.S. economist. “Companies are reluctant to initiate significant adjustments to their workforce when the forthcoming months remain uncertain.”
Additionally, the bank noted that Trump’s stringent immigration enforcement and deportation initiatives have exceeded prior expectations.
This diminished workforce availability, coupled with a stagnating labor participation rate, implies that the monthly job growth necessary to maintain stable unemployment could plummet from 50,000 to a mere 15,000. Even with this lower threshold, an uptick in unemployment is likely.
“The initial half of 2026 is expected to yield disconcertingly slow labor market growth, with unemployment likely peaking at 4.5% in early 2026,” JPMorgan asserted.
This analysis was presented shortly before the Labor Department released a delayed November jobs report, which revealed a climb to 4.6%, the highest rate in four years.
Factors contributing to this lackluster economic growth include a reduction in the labor supply due to deportations, an aging demographic, and a decrease in visas allocated for workers and students.
The influence of artificial intelligence (AI) is also pivotal in the early slump of 2026. Despite substantial investments in technology—equipment, software, and data centers—job creation has not paralleled these advancements, noted JPMorgan.
Although widespread job losses attributed to AI have yet to materialize, sectors most susceptible to the technology have reported diminished growth.
However, economists predict a turnaround in the latter half of the year. This optimistic outlook is bolstered by a more stable tariff policy, tax reductions stemming from Trump’s One Big Beautiful Bill Act, and additional interest rate cuts by the Federal Reserve.
“We believe that supportive measures are coalescing to arrest the current slowdown in the labor market and reinvigorate growth in activity by late next year,” Feroli remarked.
JPMorgan forecasts GDP growth to reach 1.8% for 2026, alongside a one-in-three probability of entering a recession, with inflation remaining persistent at 2.7%.
Conversely, Bank of America CEO Brian Moynihan anticipates that Trump will de-escalate trade tensions next year, expressing to CBS News’ Face the Nation that an average tariff rate of 15% imposed across a broad spectrum of countries has “minimal impact.”
AI innovations may also emerge as a potential catalyst for further economic progress in the upcoming year.
“Typically, it requires several years for general-purpose technologies like AI to enhance productivity,” Feroli elaborated. “However, an expedited realization of efficiency gains could yield stronger-than-anticipated GDP growth.”
This buoyant perspective stands in contrast to the persistent warnings from prominent computer scientist and AI pioneer Geoffrey Hinton, who cautioned that AI will increasingly supplant human jobs.
In an interview on CNN’s State of the Union this past Sunday, Hinton discussed his predictions for 2026, asserting that 2025 has been a pivotal year for AI.
“I foresee AI continually improving,” Hinton stated. “It is already exceptionally proficient, and it is poised to acquire the capability to supplant a myriad of jobs. For instance, it has already begun replacing positions in call centers, but its reach will extend to many additional occupations.”
Source link: Inkl.com.
