Payden & Rygel: US unemployment

Payden & Rygel: US unemployment

February 2, 2026

United States Labor force

The Federal Reserve left the fed funds rate unchanged after three straight 25-basis point cuts. The stated reason: 'the unemployment rate has shown some signs of stabilization.' But has it?

The unemployment rate slipped only slightly-from 4.5% in November to 4.4% in December - and one month doesn't make a trend. Since January 2025, unemployment has been steadily drifting higher from 4.0%. Broader labor indicators also point to ongoing weakness: private payroll growth are barely positive, the quits rate has fallen below its pre pandemic norm, and long-term unemployment has risen to a new cycle high.

Conference Board surveys show more people saying, 'jobs are hard to get,' a measure that typically tracks the unemployment rate closely. So, is the labor market stabilizing, or is the Fed hoping for a narrative that isn't supported by the data? Policymakers are betting on stability-but if the story breaks, further labor market deterioration could push the Fed back toward rate cuts sooner than expected.  

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