The U.S. December employment report sends mixed signals: Nonfarm payroll additions fell short of expectations, and the data for the previous two months were revised downwards. However, the unemployment rate dropped to 4.4%, below market forecasts, shifting the focus of the Federal Reserve back to this more sensitive indicator.
Employment Data Splits: Job Growth Weakens, Unemployment Rate Influences Policy Expectations
On the surface, the slowdown in new jobs and downward revisions obscure the employment outlook. Yet, the lower-than-expected unemployment rate suggests a larger policy impact, as the Federal Reserve has been closely monitoring unemployment rate changes recently.
Overall, Wall Street consensus leans toward "moderate but not stalling"—companies are neither accelerating hiring significantly nor engaging in mass layoffs.
Wolfe Research: AI-Related Industries See Continued Net Losses, Raising Unemployment Rate by Approximately 0.35 Percentage Points
The Wolfe Research team believes AI is reshaping the labor market structure: Since the launch of ChatGPT in November 2022, AI has contributed about 35 basis points to the unemployment rate increase, accounting for "nearly half" of the total rise.
The institution also notes that industries more directly affected by AI are experiencing continuous net job losses, suggesting the pressure is not a one-time shock but a slow variable accumulation.
Other Upward Factors: Cyclical Fluctuations Combined with Spillover Effects from Tightening Immigration Policies
For the other reasons behind the rising unemployment rate, Wolfe Research attributes it to cyclical factors and mentions that tightening immigration policies are squeezing sectors reliant on foreign labor, notably construction, installation, and maintenance.
Within this framework, even if overall employment seems "stable," the disparities across different industries will be more pronounced in the unemployment rate.
Looking Ahead to 2026: Monthly Job Gains May Return to 80,000, But AI Still Seen as Major Downside Risk
Looking forward to 2026, Wolfe Research anticipates that the most affected industries will remain under pressure. However, if cyclical recovery and easing of government hiring restrictions occur, it may partially offset the impact of AI proliferation.
The institution forecasts an average annual monthly employment growth of about 80,000, higher than the approximately 50,000 increase in December, but also clearly warns that AI remains a "significant downside risk" in the employment and unemployment rate trajectory.
