Labor Market Signals Flashing Red: What Economists Are Seeing

just_another_wallet · 2026-01-15T23:07:31+00:00

The U.S. labor market is showing signs of deterioration not seen since the 1970s, raising recession concerns. Notably, job creation metrics have weakened, with critical indicators falling below thresholds that historically signal recession. Market implications suggest potential turbulence ahead for investors.

just_another_wallet

2026-01-15 23:07:31

Abstract generation in progress

The U.S. labor market is sending troubling signals that haven’t appeared since the 1970s, and they’re raising fresh recession concerns among market watchers. Economist Henrik Zeberg recently highlighted a deteriorating employment picture that goes far deeper than headline numbers suggest.

The Numbers Tell a Grimmer Story

Job data released in recent months reveals a labor market facing headwinds. When October 2025 figures were revised, the loss ballooned from 105,000 to 173,000 positions—a significant miss from initial expectations. November followed suit with only 56,000 jobs added, well below typical growth rates. December added 50,000 jobs, representing one of the weakest performances for that month outside actual recession periods in recent decades.

These consecutive downward revisions paint a picture of slowing momentum rather than stability. The initial reports masked underlying weakness that only became apparent upon deeper inspection.

The Recession Indicator That Matters

What concerns Zeberg most isn’t any single month’s performance, but rather a historical pattern embedded in the data. The 12-month moving average of job creation—a metric that smooths out monthly noise—has historically dipped below critical thresholds before every U.S. recession since the 1970s. That threshold has now been breached.

This measure carries special weight because it filtered out false signals during previous cycles. Notably, the current labor market is significantly larger than in past decades, yet this indicator still crossed into recession-warning territory. That’s the core of the cautionary outlook.

Market Implications Ahead

Zeberg’s extended pessimism on economic fundamentals extends to forecasting potential market turbulence. While acknowledging a historic crash could materialize, he notes that various asset classes—including equities and cryptocurrencies—may still reach new peaks before any downturn materializes.

For investors, the recession warning underscores the importance of monitoring labor market health as a leading indicator, regardless of near-term asset price movements.

Featured image via Shutterstock

Source:

This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.