January’s job cuts and hiring freeze sharpen pressure on the Fed
January’s layoff surge hands the Federal Reserve another reminder that the labor market’s cushion is thinning, and gives mortgage professionals fresh reason to believe the next move on rates would be down, not up.
United States‑based employers announced 108,435 job cuts in January, up 118% from a year earlier and 205% from December, according to outplacement firm Challenger, Gray & Christmas.
It was the worst January for planned layoffs since 2009 and came alongside just 5,306 announced hires, the weakest start to the year since Challenger began tracking hiring plans in 2009.
Transportation, technology and healthcare bore the brunt, with major cuts at UPS, Amazon and large hospital systems.
Job cuts and weaker 2026 outlook
“Generally, we see a high number of job cuts in the first quarter, but this is a high total for January,” Andy Challenger, workplace expert and chief revenue officer at Challenger, Gray & Christmas, said.
“It means most of these plans were set at the end of 2025, signaling employers are less‑than‑optimistic about the outlook for 2026.”
Healthcare providers, he said, were “grappling with inflation and high labor costs” and facing lower government reimbursement, pressures that had led not only to layoffs but “other cutting measures, such as some pay and benefits.”
Challenger also cautioned against overstating the role of automation in the latest wave. “It’s difficult to say how big an impact AI is having on layoffs specifically. We know leaders are talking about AI, many companies want to implement it in operations, and the market appears to be rewarding companies that mention it,” he said.
Fed debate intensifies as labor cools
The Fed left its benchmark rate in the 3.5%–3.75% range at its late‑January meeting, but economists warned that a weak run of jobs figures could tip the balance toward a cut as soon as March.
Several mortgage‑focused analysts argue that softening employment data, combined with ebbing inflation, give policymakers room to ease without reigniting price pressures.
December reporting on private‑sector job losses noted that growing labor‑market risks already pushed some Fed officials to endorse lower rates in the months ahead, even as others urged caution.
Stephen Miran, Governor at the Federal Reserve, argues monetary policy remains too restrictive and that deeper cuts this year could ease lending costs and reshape mortgage demand.https://t.co/fcXggpqksf#finance #monetarypolicy #interestrates #FederalReserve
— Mortgage Professional America Magazine (@MPAMagazineUS) February 4, 2026
For lenders and originators, the Challenger data adds to a picture of a labor market losing altitude rather than falling off a cliff. If the trend persisted into official payroll and unemployment reports, it would likely harden the case for Fed cuts – and with it, the prospect of slightly lower funding costs, a more active refinance channel and a more fragile borrower base.
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