Good morning, investors. The labor market has become a critical input for asset prices in recent months, though much of that can be chalked up to how investors expect the jobs data to guide monetary policy.
Yet there’s one corner of the job market that’s made a lot of noise but it’s market implications are minimal.
No sweating government jobs
Today’s column is a guest post from Hardika Singh, an economic strategist at Fundstrat Global Advisors, an investment research firm.
If not for a sharp decline in federal jobs this year, the labor market wouldn’t look like it was teetering on the edge of disaster.
That’s partially why investors aren’t too concerned.
Out of 11 industries tracked by the Bureau of Labor Statistics in its monthly nonfarm payrolls report, the government sector has lost the greatest number of jobs this year.
That’s mostly due to DOGE reducing the number of federal employees.
Treasury Secretary Scott Bessent said earlier this year there will be a “detox period” for the economy because there was excess employment in the government.
The picture gets worse if only the federal level is considered. State and local jobs have actually made minor gains.
Still, the drop in federal jobs this year is on pace for the biggest annual decline since 1953, when soldiers were returning home from the Korean War and coming off payrolls.
And even as a percentage of total employment, jobs in the federal sector are also on pace for the biggest loss since 1953.
Meanwhile, most of the jobs growth this year has come from the healthcare and social-assistance sectors, where increases are seen as a function of an aging population rather than a booming economy.
But there are two reasons investors aren’t alarmed:
Few look to an increase in federal jobs as confirmation that strides made in economic growth are sustainable. Jobs in that sector go up during good times because a rising tide lifts all boats.
The labor market slowdown is a concern but not yet panic-inducing, giving the Fed room to ease interest rates at a moderate pace.
If rates do decline next year as markets expect, that would benefit rate-sensitive sectors like real estate, utilities and financials, all of which have lagged the broader market this year.
Small-cap stocks, too, should benefit.
Lower rates help reduce borrowing costs and make companies’ future earnings look more attractive, which suggests 2026 could bring a bullish broadening across the S&P 500.
Most sectors have lagged the S&P 500’s 15% gain in 2025 (Chart courtesy of Exhibit A)
Hardika Singh is an economic strategist at Fundstrat Global Advisors, an investment research firm. Follow her on LinkedIn and read her disclosures here.
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Market snapshot
Elsewhere
📊 CPI came in much cooler than expected. It unexpectedly eased to an annual rise of 2.7% in November, though the data had holes in it due to the government shutdown. Some economists are urging caution on the latest report. (Yahoo Finance)
🤖 OpenAI could secure an $830 billion valuation. Concerns about an AI bubble don’t seem to impact the ChatGPT maker’s funding abilities, and it’s next $100 billion round could push its valuation to new heights. (WSJ)
📈 Trump Media stock jumped 42% Thursday. Shares notched their biggest one-day gain since January 2024 after the company agreed to merge with fusion-power company TAE Technologies in a $6 billion deal. (CNBC)
Rapid-fire
The Bank of Japan raised interest rates to a 30-year high despite a weakening economy (CNBC)
FedEx incurred $25 million in additional costs after a UPS cargo plane crash led to the grounding of all MD-11 planes (WSJ)
President Trump proposed using tariff revenue for “warrior dividend” checks for military members (Yahoo Finance)
Deflation is the real economic story of the AI era (Pomp Letter)
A bullish trifecta can push stocks to new records before year-end (Opening Bell Daily)
TikTok signed a deal for a new US joint venture (Bloomberg)
President Trump wants to loosen federal regulations on marijuana (Reuters)
North Korea just had its biggest year ever for stealing cryptocurrencies (Yahoo Finance)
Interview
I sat down with Steve Hou, a quant researcher at Bloomberg, to discuss how AI is exacerbating the K-shaped economy and how investors can position themselves for the shifting outlook.
Tune in on YouTube, Spotify or Apple Podcasts.
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On this day
🗓December 19, 1927: The Dow Jones Industrial Average closed above 200 for the first time ever, about 21 years after first closing above 100. That came just ahead of the 1929 crash.
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📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.
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