We guess if you say something enough, a lot of people will start to believe it. The current refrain is that the labor market is cold, weak, struggling. A Google search for “labor market” is eye opening. The first five headlines use the words ‘weakened,’ ‘troubling,’ ‘risky,’ ‘slowing,’ and ‘warning signs.’
We are finding the opposite. Call them anti-warning signs. For example, the Fed’s fourth quarter Senior Loan Officer Survey found the net percentage of domestic banks who are tightening standards is negative, indicating that loan books are open for business. This is the tenth consecutive quarter where the survey showed a greater propensity to lend across banks’ entire operations. This indicator tends to lead the unemployment rate by a few years, indicating that November’s 4.6% print may be at or near the worst of it for this cycle.
Some observers seem acutely concerned with the decline in job openings from their early 2022 highs. But we think we can all agree that the 2021-2022 fever dream was a special situation: federal and state governments were flooding the system with stimulus payments, igniting HR hiring sprees. At the peak in March 2022, the job openings-to-working age population ratio touched 5.9%, blowing out the prior cycle highs of this century, which were 2.9%, 2.5% and 3.7% in 2001, 2007 and 2018, respectively. With the current ratio stabilizing at 3.6%, the job openings tally is hardly discouraging.
Another promising portent for jobs: small businesses are increasingly indicating improving hiring intentions. The National Federation of Independent Business (NFIB) survey’s employment question has been ticking up from the pessimism that pervaded in the spring. Subtracting the “decrease employment” responses from the “increase employment” ones results in a figure that has been steadily increasing; the move higher over the last six reports has been a net seven percentage points.
Additionally, we have some heartening guideposts from Canada and Mexico. In the former, labor conditions looked freaky as summer transitioned to autumn, when Canadian unemployment printed 7.1% in both August and September. Then something intriguing happened: it started declining. In October, Canada’s unemployment rate was 6.9%, and then November watched it fall hard, to 6.5%. In Mexico, the unemployment rate got as low as 2.2% before the Liberation Day panic, rising to 3.0% in September. But in the October report, Mexico’s unemployment rate suddenly fell to 2.6%.
Finally, there was a little bit of a shock number out of the Philly Fed’s December Manufacturing Business Outlook Survey. The percentage of respondents who reported employment decreases fell to 0.4%. That means there was probably one respondent, maybe two, who reported a lower headcount. December was the fifth lowest “decrease employment” reading in records to 1967.
When we look at a combination of bank lending intensity, job openings, employment surveys, and labor conditions in border nations, what we find is a job market that took a sentiment hit in 2025. It seems an error to use words like “risky” or “troubling” to describe the current situation, or for that matter, the outlook for 2026. It is a distinct possibility that the worst labor conditions already happened around the time the stock market was tumbling this past spring. When we penned WisdomTree’s 2026 Outlook this week, the labor market was not an area of focus for us when it comes to adverse risks.
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