Recent data shows the U.S. labor market is weakening, and economists warn it’s becoming the biggest risk to the 2026 economic outlook. Job creation has stalled, job openings have plunged, and hiring indicators across industries are flat. Fed officials, including Governor Christopher Waller, say the labor market “does not remotely look healthy” and may require additional interest rate cuts if conditions worsen.
While layoffs aren’t widespread, unemployment is expected to drift higher, and many economists now anticipate two to three Fed rate cuts this year. A shaky stock market is also weighing on consumer sentiment, especially for households without significant financial assets, raising concerns about future spending. Some relief may come from new stimulus measures and tax rebates, but overall growth expectations remain modest, around 2.2%, and heavily dependent on Fed support.
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Recent data shows the U.S. labor market is weakening, and economists warn it’s becoming the biggest risk to the 2026 economic outlook. Job creation has stalled, job openings have plunged, and hiring indicators across industries are flat. Fed officials, including Governor Christopher Waller, say the labor market “does not remotely look healthy” and may require additional interest rate cuts if conditions worsen.
While layoffs aren’t widespread, unemployment is expected to drift higher, and many economists now anticipate two to three Fed rate cuts this year. A shaky stock market is also weighing on consumer sentiment, especially for households without significant financial assets, raising concerns about future spending. Some relief may come from new stimulus measures and tax rebates, but overall growth expectations remain modest, around 2.2%, and heavily dependent on Fed support.