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Weekly Update 2/13/2026: Payrolls Exceed Expectations as Unemployment Falls

Insights
  • DuPont reports solid growth in key areas
  • BorgWarner links with data center builder
  • Existing home sales fall
  • Consumer inflation tamer than expected

Jobs

The Bureau of Labor Statistics (BLS) reported that nonfarm payrolls rose by 130,000 in January, and the unemployment rate fell to 4.3%. This data reinforces the Fed’s recent decision to keep interest rates on hold at their January meeting. In the futures market, traders estimated that the next rate cut would occur in June (49% chance of a cut based on Wednesday’s data) with July (49%) being the next highest probability month. The consensus figure for January in a survey of economists by Bloomberg called for only a 65,000 gain. The increase last month was led by positions in health care, which added the most jobs since 2020 and accounted for the majority of overall job growth in 2025. Manufacturing saw the first monthly gain in employment in more than a year while Federal government payrolls continued to fall. Average hourly earnings rose 0.4% in January, up from a downwardly revised 0.1% in December.  

Each January, the Labor Department benchmarks payrolls to a more accurate but less timely series called the Quarterly Census of Employment and Wages. That data is based on state unemployment insurance tax records. The adjustments showed that job growth was 862,000 lower in the 12 months through March 2025 than initially reported. That means that job gains averaged just 15,000 a month last year, significantly below the initially reported 49,000 pace. Thus, last year’s figures were more optimistic than they should have been. Nonetheless, that down note means that maybe the job market is at or near its nadir because recent figures showed some “green shoots.” January recorded the biggest drop in people working part-time for economic reasons since June 2022. Plus, there was a notable drop in the number of people out of work for at least 27 weeks. The BLS, with this week’s release, updated its so-called “birth-death model,” which attempts to accurately include employees at firms that are in the start-up phase and subtract those working at businesses which have failed. Economists have commented that the new methodology should improve the model’s responsiveness to current economic conditions and reduce the size of benchmark revisions over time. Recent large modifications have been bigger than usual, which many economists attribute to the unique post-pandemic environment. Time will tell if this helps smooth readings in the future. Regardless, historically the data became more accurate as time passed and more businesses got around to responding to survey requests.    

Retail Sales

According to the Commerce Department, retail sales for the month of December came in at a flat reading. That was disappointing after a 0.6% gain in November. Excluding auto dealers and gasoline stations, sales were also unchanged from the prior month. Of the 13 categories, eight posted declines including clothing stores, auto dealers and furniture outlets. Building materials and sporting goods were two retail categories that actually posted an increase for that month. The extreme winter weather in most of the country for the second half of January and into February means it will be hard to get consumption on track during the first quarter of 2026, especially if more storms hit over the next six weeks. The consumer is key to GDP growth because consumption comprises approximately two-thirds of that statistic. Retail sales are generally viewed as a coincident indicator meaning it does not have a lot of predictive power, but it does reflect the current state of the markets. Therefore, it is no surprise that the flat reading for December coincided with a relatively meager 0.06% gain in the S&P for that month.    

Employment Cost Index

The employment cost index (ECI) is an in-depth measure of wage and benefit growth data that is released each quarter. The ECI rose 0.7% during the fourth quarter of 2025, down from the 0.8% reading during the third quarter. The consensus was for a gain of 0.8%, so the final figure was slightly below. On a year-over-year basis, the index fell 3.4%, the lowest since June 2021. That should support the thesis that the Fed does not need to worry about wage pressure as it contemplates inflation pressure. Average hourly earnings fell 3.7%.  

CPI

The BLS reported the latest consumer price index data this morning for the month of January. The headline figure rose 0.2% from the prior month compared to the consensus estimate in a survey of economists taken by Bloomberg of 0.3%. Excluding the more volatile food and energy sectors, the so-called core CPI rate rose 0.3% for the month, or 2.5% year-over-year. The market was anticipating a 2.5% yearly increase so the results on an annual basis were in-line with estimates. Essentially, a pick in service categories was enough to overcome stable goods prices. Nevertheless, it was the smallest increase in the core rate since 2021.  

Higher prices for air fares, recreation, medical care and communication were offset by lower prices of used vehicles and household furnishings. Auto insurance finally took a break and declined month-to-month after a series of seemingly relentless increases. Similar to the labor report, January was the period where the BLS incorporated new seasonal adjustment factors, which also could have played a role in the subdued print. The department also uses January as the time to adjust the relative importance of the individual categories that make up the CPI. It will take some time to see how these modifications will affect the output.  

Existing Home Sales

Mother Nature had its way with home sales in January. According to the National Association of Realtors, existing home sales plunged 8.4% in January, the biggest monthly decline since February 2022. Snowstorms and frigid temperatures combined to depress consumer confidence and buyer’s desire to shop for homes. Economists surveyed by The Wall Street Journal had forecast a smaller 4.6% decline. “Improving affordability should have brought more people to the market,” said Lawrence Yun, NAR’s chief economist. “The sentiment about the economy is not there, and of course home buying does require some degree of people’s comfort levels, confidence, to enter the market.”  According to realtor Redfin, almost two-thirds of home buyers in 2025 paid below the original listing price. The median home price rose 0.9% compared to the year ago to $396,800. Mortgage rates currently hover around the low 6% level compared to about 6.9% in the first two months of 2025, but that has not spurred a buying spree. The inventory of homes for sale rose 3.4% from January of 2025 which is also giving buyers more time to consider options and potentially wait for lower rates. Approximately 90% of housing transactions are for previously-owned homes. The spring is typically a busier time of the year—temperatures in much of the country are definitely higher then!  

Company Events

SGK writes additional weekly commentary for clients of the firm detailing recent events and earnings of core equity holdings.

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