Soft Jobs Data, Slower Home Construction

[Derek Brickley]

Week of January 5, 2026 | Market Snapshot for Real Estate & Mortgage Pros

As we kick off the new year, fresh data confirms two important trends: the job market is quietly cooling, and new home construction is slowing more than expected. Both matter — especially for mortgage rates, housing supply, and buyer demand heading into early 2026.

Here’s what stood out this week.

Jobs Report Looks Weaker Beneath the Headlines

December’s Jobs Report showed 50,000 jobs added, below the 73,000 expected. The unemployment rate dipped slightly to 4.4%, which on the surface sounds positive.

But the real story is under the hood.

Payrolls for October and November were revised down by a combined 76,000 jobs, continuing a trend of initial overestimates being corrected lower. On top of that, unemployment was revised higher in multiple months last year — another signal the labor market isn’t as strong as first reported.

Even more telling: nearly all of December’s job gains came from health care and leisure & hospitality, both sectors that tend to be either recession-resistant or seasonally boosted in December. Strip those out, and job growth likely would’ve been negative again.

Why this matters: A softer labor market increases pressure on the Fed to stay accommodative — which generally helps mortgage rates.

Private Payrolls Rebound — But the Trend Is Still Weak

Private-sector hiring bounced back modestly in December, with 41,000 jobs added, according to ADP. That followed a 29,000-job decline in November.

Small businesses added some jobs again, medium-sized firms did most of the lifting, and large employers barely hired at all. Industry gains were again concentrated in health care and hospitality — echoing the government report.

Zooming out tells the real story:

• Past 3 months: ~20,000 jobs/month
• Past 12 months: ~51,000 jobs/month
• Past 5 months combined: just 27,000 jobs

Why this matters: Hiring isn’t collapsing — but it’s clearly losing momentum, which supports the case for lower rates later this year.

More Data Confirms the Labor Market Is Cooling

Other indicators back this up:

• Initial jobless claims ticked higher
• Continuing claims rose sharply and remain elevated
• Job openings fell to 7.15 million, well below 2022 levels
• Hiring rate (3.2%) and quit rate (2.0%) remain near decade lows
• Annual job cuts for 2025: 1.2 million — one of the highest totals since 1989
• Hiring announcements: weakest year since 2010

Bottom line: This is a “low-fire, low-hire” labor market — not a crash, but steady cooling.

Housing Starts Drop to Pandemic-Era Lows

New home construction is slowing more than many expected.

Housing Starts fell 4.6% to their lowest level since early 2020. Building Permits — a forward-looking signal — also slipped.

Why this matters for real estate:

• The market still needs more supply
• Builders can’t turn inventory on overnight
• If mortgage rates ease further, demand could rebound faster than supply
• That combination puts upward pressure on prices, not downward

What This Means Going Forward

• Cooling labor data keeps rate relief on the table
• Slower construction limits future inventory
• Buyer demand may rebound faster than expected once rates move
• Waiting for “perfect” conditions could mean more competition later in 2026

What to Watch This Week

A busy data stretch ahead:

• Tuesday: Consumer inflation, New Home Sales
• Wednesday: Wholesale inflation, Existing Home Sales, Retail Sales
• Thursday: Weekly Jobless Claims

These reports will help shape expectations for rates in Q1.

Technical Snapshot

Mortgage bonds rallied late last week after news that Fannie Mae and Freddie Mac were directed to purchase $200B in mortgage bonds, setting a new trading range.

• Bond support: 100.12
• Resistance: 100.84
• 10-year Treasury: rangebound, capped near 4.20%