Labor Market Signals Are Flashing Red: Is a Recession Coming?

The U.S. jobs market is sending increasingly troubling signals. According to economist Henrik Zeberg’s recent analysis, employment figures reveal a far grimmer picture than headline numbers suggest—raising critical questions about whether a recession is coming sooner than markets expect.

The Numbers Tell a Worrying Story

The severity becomes clear when examining the actual employment revisions. October 2025 saw payroll figures revised downward from a reported 105,000 job loss to a sharper 173,000 decline. November followed suit with job creation revised to just 56,000, well below initial expectations. These consecutive downward adjustments expose a labor market losing steam faster than reported.

December’s employment report, while avoiding an outright contraction with roughly 50,000 jobs added, paints an equally concerning picture. It ranks among the weakest December readings outside of recession periods in decades. When stacked alongside the October and November deterioration, the trend becomes undeniable: hiring momentum is collapsing.

The Historical Recession Indicator

What makes Zeberg’s warning particularly significant is his focus on a historically reliable metric: the 12-month moving average of job creation. This smoothed measure has demonstrated remarkable predictive power, dipping below specific thresholds at the start of every U.S. recession since the 1970s.

The critical development is that this moving average has now breached those recession-entry levels. This represents a milestone moment—despite today’s labor force being substantially larger than in previous economic cycles, the proportional weakness in job creation has reached recession-warning territory.

What’s Next?

Zeberg has maintained a cautious stance on the economy for months, publicly warning of a potential historic market crash. His current assessment aligns with this longer-term skepticism. Notably, he suggests that before such severe declines materialize, certain sectors including equities and digital assets may initially reach new highs—adding complexity to near-term market dynamics.

The question is a recession coming has moved from theoretical concern to data-driven probability. If the labor market continues its current trajectory, policymakers and investors alike may soon face confirmation of what these employment figures are already signaling.