Jobs Data Needs a Closer Look, Inflation Cools Again

[Derek Brickley]

Week of February 9, 2026 in Review

January’s jobs report looked strong at first glance. Inflation cooled more than expected. Home sales slowed to start the year.

But once you look under the hood, the story gets more nuanced especially for mortgage rates and the 2026 housing market.

January Jobs Report: Strong Headline, Softer Trend

The Bureau of Labor Statistics reported 130,000 jobs added in January, more than double expectations. The unemployment rate dipped to 4.3%.

On the surface? Solid.

Underneath? More complicated.

Here’s what stood out:

• ADP showed just 22,000 private payroll gains
• Revelio reported a 13,300 job decline
• Job openings fell sharply to 6.54 million
• Challenger reported the highest January job cuts since 2009
• January hiring announcements were the lowest in 17 years

Then there were revisions:

• November and December were revised lower
• Total 2025 job growth was revised down by 403,000
• Net job creation for 2025 now stands at just 181,000 jobs
• That’s an average of 15,000 per month

And then there’s seasonality.

In raw terms, payrolls actually fell by 2.65 million jobs in January (normal post-holiday layoffs). After seasonal adjustments, that decline became a gain of 130,000.

Bottom line: The labor market isn’t collapsing but it is clearly cooling. The headline number looks stronger than the broader trend suggests.

For mortgage rates, softer employment momentum can reduce inflation pressure and give the Fed more flexibility later this year.

Inflation Falls to an 8-Month Low

Consumer inflation rose just 0.2% in January and slowed to 2.4% year over year, down from 2.7%.

Core inflation eased to 2.5% annually.

That’s the lowest annual rate in eight months.

Shelter (which makes up ~35% of CPI and ~44% of core CPI) was modest in January, helping bring the annual number down.

Airline fares jumped, but the broader inflation picture was contained.

Bottom line: Inflation is moving in the right direction.

The Federal Reserve is still cautious, but easing inflation + cooling labor data strengthens the case for eventual rate cuts later in 2026.

For buyers and sellers: inflation cooling is generally supportive for mortgage rate stability.

Existing Home Sales Slow to Start 2026

After a strong December, existing home sales fell 8.4% in January and were down 4.4% year over year.

Inventory slipped slightly month-over-month but remains higher than last year.

NAR noted unusually cold weather and heavy precipitation may have distorted the numbers.

The more important point?

Affordability is improving. NAR's Housing Affordability Index shows homes are the most affordable they've been since March 2022.

Bottom line: January may be weather-driven noise.

If affordability continues improving and rates stabilize, demand could rebound heading into spring.

For realtors: this looks more like a pause than a collapse.

Consumer Spending & Unemployment Signals

Retail sales were flat in December (missing expectations).

Initial jobless claims remain relatively low at 227,000. Continuing claims remain elevated at 1.86 million.

That combination — low layoffs but slower rehiring — continues to describe a “low-fire, low-hire” labor market.

Bottom line: Consumers are cautious, not panicked. Hiring is slow, not frozen.

This environment typically supports gradual rate adjustments rather than aggressive moves.

What This Means for Mortgage Rates

• Inflation is cooling.
• Labor data is softening beneath the surface.
• The Fed remains cautious.
• Housing affordability is improving.

That’s not a crash setup.

It’s a stabilization setup.

And stabilization is often what allows spring markets to gain traction.

What to Watch This Week

• Fed meeting minutes (Wednesday)
• Q4 GDP (Friday)
• December PCE inflation (Friday)
• Builder confidence + new home sales + pending sales

Markets will be watching closely for confirmation that inflation continues easing.

Technical Snapshot

Mortgage Bonds are testing resistance near 100.38. If they break higher, the next target is near 100.84.

The 10-year Treasury yield dropped below 4.05% and could test 4% next.

That level will matter for rate direction in the near term.

If you want help framing this for buyers or sellers heading into spring, I’m always happy to workshop conversations.