Market Update 2.17.26 - Jobs Data Needs Closer Look, Annual Inflation Eases

Week of February 9, 2026 in Review 

January’s Jobs Report warrants a closer look, inflation data was encouraging, and existing home sales slowed to start the year. Here’s a look at the key highlights. 

• Headline Jobs Number Strong, But the Details Matter 

• Annual Inflation Eases to 8-Month Low 

• Existing Home Sales Ease to Start 2026 

• Consumer Spending and Unemployment Update 

• What to Look for This Week 

• Technical Picture   

Headline Jobs Number Strong, But the Details Matter  

January’s Jobs Report from the Bureau of Labor Statistics (BLS) showed 130,000 jobs added, more than double the 55,000 expected. The unemployment rate edged down from 4.4% to 4.3%.

What’s the bottom line?

At first glance, that looks like a solid report. But conflicting labor data, revisions, and seasonal adjustments suggest the underlying trend may be softer than it appears.   

ADP reported just 22,000 private payroll gains last month, while Revelio showed a decline of 13,300 non-farm jobs. Job openings fell sharply to 6.54 million in December. Plus, Challenger, Gray & Christmas reported the highest January job cuts since 2009 and the lowest level of

January hiring announcements since it began tracking the data 17 years ago.  

Revisions to the BLS report also played an important role. November and December payrolls were revised lower by a combined 17,000 jobs. More notably, total job growth for 2025 was revised down by 403,000, leaving just 181,000 net jobs created for the year – an average of only 15,000 per month.

Seasonal adjustments further complicate the picture. January typically sees significant job losses as holiday and seasonal workers are let go, so the BLS applies a large adjustment. In the raw data, payrolls actually fell by 2.65 million jobs. After applying the sizable January adjustment, that decline translated into a reported gain of 130,000 jobs.

Annual Inflation Eases to 8-Month Low

Consumer prices rose 0.2% in January and 2.4% year over year, down from 2.7% in the previous CPI report and marking the lowest annual rate in eight months. Core inflation, which excludes food and energy, increased 0.3% for the month and eased to2.5% annually.

Shelter remains a key driver of inflation, accounting for about 35% of headline CPI and 44% of core CPI. Because of this heavy weighting, even small changes in shelter costs can significantly impact overall inflation. Shelter readings were modest inJanuary, helping push the annual rate lower. Airline fares, however, jumped sharply and added some upward pressure.

What’s the bottom line?

The Federal Reserve continues to weigh inflation pressures against signs of a cooling labor market. Sticky inflation supports a cautious approach to rate cuts, while softer employment data increases the case for easing. The Fedheld rates steady in January after cutting its benchmark Federal Funds Rate by 25 basis points at each of its final three meetings last year. Although this rate does not directly determine mortgage rates, it influences borrowing costs across the broader economy.

Fed Chair Jerome Powell has noted there is “no risk-free path,” reinforcing that both inflation and labor market trends will guide policy decisions in the months ahead.

Existing Home Sales Ease to Start 2026

After a nice boost in December, existing home sales fell 8.4% month over month in January, according to the

NationalAssociation of REALTORS® (NAR). Sales were also down 4.4% compared to a year ago. Housing inventory dipped 0.8% from December to 1.22 million homes but remained 3.4% higher than this time last year.

What’s the bottom line?

NAR Chief Economist Lawrence Yun called the drop in sales “disappointing,” noting that unusually cold temperatures and heavier-than-normal precipitation in January make it difficult to determine whether the decline reflects underlying market conditions or a temporary weather-related slowdown.

He added that affordability is improving, with NAR’s Housing Affordability Index showing homes are the most affordable they’ve been since March 2022.

Consumer Spending and Unemployment Update

While strong retail sales in November signaled a solid start to the holiday shopping season, December’s results fell short. Sales were flat month over month, missing the expected 0.4% increase, and eight of the thirteen retail categories recorded declines.

Initial jobless claims fell by 5,000 to 227,000, while continuing claims increased by 21,000 to 1.862 million. Continuing claims have remained elevated for an extended period, suggesting unemployed workers are taking longer to find new opportunities.

What to Look for This Week

Several key economic releases delayed by the government shutdown are scheduled for this week, including the first estimate of fourth quarter GDP and the December PCE inflation report, both due Friday. The latest Fed meeting minutes will be released Wednesday and could also move markets.

Housing data will also be in focus, with reports on home builder confidence, new and pending home sales, and new construction activity.

Technical Picture

Mortgage Bonds moved higher late last week, finishing Friday near the key 100.38 resistance level. If Bonds break above that ceiling, they could test 100.84 – a Fibonacci level and a high from three years ago. Meanwhile, the 10-year Treasury yield fell below support at 4.05% and has room to decline further toward the next support level near 4%.