Weekly Market Commentary January 12, 2026
WEEK IN REVIEW
Economic indicators over the recent period delivered a mixed but informative set of signals. The ISM Manufacturing Purchasing Managers’ Index (PMI) came in slightly worse than expected at 47.9% versus 48.3% expected, marking the tenth straight month of contraction and the lowest reading of 2025. This could reflect weakness in U.S. manufacturing due to ongoing demand softness, cost pressures, and labor contraction. However, the ISM Non-Manufacturing PMI rose to 54.4% in December, up from 52.6% in November. This marked the strongest reading of the year and signals solid expansion in the services sector.
The ADP employment report showed a modest gain of 41,000 jobs added in December, rebounding from 29,000 in November, but falling short of the consensus expectation of 48,000. This indicates a continued underlying weakness in private hiring overall. Also, the Job Openings and Labor Turnover Survey (JOLTS) showed 7.1 million job openings, nearly unchanged from October but down approximately 885,000 year-over-year, marking a 14-month low. This may signal a cooling in labor demand reflected with fewer available positions.
U.S. non-farm payrolls increased by 50,000 in December, falling short of expectations of 60,000-70,000. This was also down from the revised 56,000 gain in November. Despite this, the unemployment rate dropped to 4.4%, the lowest level since September. Average hourly earnings rose by 0.3% month-over-month, indicating steady wage growth. This indicates stability in the labor market with hiring continuing at a slow pace even as wage pressure persists.
Initial jobless claims for the week rose to 208,000, up 8,000 from the prior week’s revised 200,000. However, this was below the forecast of 210,000. Despite this slight uptick, the low level of filings suggests that widespread layoffs have not materialized. Employers are hesitant to expand or cut payrolls amid economic uncertainty. Continuing claims also rose to 1.91 billion, pointing to longer job searches and softer re-employment.
The U.S. trade deficit narrowed sharply to $29.4 billion in November, down from 48.1 billion the prior month. This marks the smallest U.S. trade deficit since 2009. This was driven largely by one-off factors with a surge in gold exports and a drop in pharmaceutical imports. While this will boost Q4 GDP, this shift reflects temporary commodity and tariff effects rather than a broad-based improvement in trade.
Housing starts declined by 4.6% to a 1.25 million annualized rate in October, driven by a 26% plunge in multi-family units, while single-family starts rose 5.4%. This could signal a rebalancing in residential construction, with stronger demand for lone-unit homes but considerable weakness in apartment development.
These prints suggest that the economy is still expanding, powered by services demand and productivity gains. Meanwhile, manufacturing and some corporate-facing service categories remain under pressure. In addition, we are seeing a softening labor market where hiring is subdued and employers are cautious.
Click HERE to learn more.