①JPMorgan predicts that the US labor market will experience "disturbingly slow growth" in the first half of 2026, with the unemployment rate peaking at 4.5% in early 2026; ②The report notes that Trump's trade policies have introduced uncertainty for businesses, while his immigration control measures have reduced labor supply; ③Despite multiple challenges, JPMorgan forecasts that the US labor market will improve in the second half of 2026.
According to a report by JPMorgan, the US labor market is expected to experience 'disturbingly slow growth' in the first half of 2026, but improvements are anticipated in the second half.
This year, amid fluctuations in the economy and financial markets, the labor market has cooled down. Many economists attribute the weakening employment growth momentum this year to the uncertainty brought about by President Donald Trump’s tariffs and trade policies.
Regarding the upcoming year 2026, JPMorgan’s report pointed out, "In the first half of 2026, the labor market may experience disturbingly slow growth, with the unemployment rate peaking at 4.5% at the beginning of 2026."
Multiple factors affecting the labor market
JPMorgan’s chief US economist, Michael Feroli, wrote in the report, "Whether in the long or short term, business planning has been consistently challenging, with both layoff and hiring rates being low. Uncertain about what will happen in the next six months, companies are reluctant to make significant adjustments to their workforce, whether expanding or reducing it."
Moreover, JPMorgan added that Trump’s actions on immigration control and deportations have been more aggressive than expected. The weakness in the job market is attributed to the reduction in labor supply, driven by deportation of undocumented immigrants, aging demographics in the US, and fewer visas issued to workers and students.
This month, the US Bureau of Labor Statistics delayed the release of the November employment report, which showed that the unemployment rate climbed to 4.6% in November, reaching its highest level in four years.
In addition, JPMorgan also mentioned another major factor affecting the US labor market: artificial intelligence. The report noted that this technology has spurred large-scale investments in equipment, software, and data centers, but has not created many job opportunities.
Although there are currently no signs of mass unemployment caused by artificial intelligence, JPMorgan’s report noted that employment growth in some industries most affected by this technology has slowed.
A turnaround is expected in the second half of 2026.
Despite numerous headwinds in the labor market, some economists predict that it will turn around in the second half of this year. They attribute this to stabilizing tariff policies, tax cuts implemented under the 'Big and Beautiful Act,' and further interest rate reductions by the Federal Reserve.
JPMorgan's Feroli pointed out, 'We believe supportive factors are converging, which will curb the slowdown in the labor market and reinvigorate economic growth later next year.'
In addition, the report from JPMorgan also forecasts that the U.S. Gross Domestic Product (GDP) growth rate for 2026 will be 1.8%, with a one-third probability of a recession, while inflation will remain stubbornly high at 2.7%.
Editor/KOKO