As the year began, payroll growth strengthened
The recovery in payrolls growth appears to have continued into the new year, according to Bank of America internal data. At the same time, the rise in unemployment payments seen in our data has leveled off and is showing signs of declining. Taken together, we think this paints an encouraging picture at the start of 2026.
We use Bank of America internal deposit data to estimate a payrolls series by looking at how the number of customer accounts receiving a paycheck is changing. This data can be fairly noisy, partly due to seasonal variation. However, looking at a three-month moving average, Exhibit 1 suggests that the year-over-year (YoY) growth in our measure rose to 0.8% YoY in January 2026, up from the 0.6% YoY we saw in December 2025.
Encouraging in nominal dollars but still slower than inflation, particularly for mid-low income Americans.
However,
US companies announced the largest number of job cuts for any January since the depths of the Great Recession in 2009, according to data from outplacement firm Challenger, Gray & Christmas.
Companies last month announced 108,435 job cuts, a 118% increase from a year earlier. The report on Thursday also showed hiring intentions slid 13% from a year earlier to 5,306—marking the weakest total for any January in the firm’s records back 17 years.
“Generally, we see a high number of job cuts in the first quarter, but this is a high total for January,” said Andy Challenger, the company’s chief revenue officer. “It means most of these plans were set at the end of 2025, signaling employers are less-than-optimistic about the outlook for 2026.”
Almost half of the job cuts announced in January were tied to three companies—Amazon, United Parcel Service and Dow. Amazon announced plans to cut 16,000 corporate positions while UPS said it would shed as many as 30,000. Chemical maker Dow intends to eliminate about 4,500 positions, while Peloton Interactive and Nike also announced mass dismissals. (Bloomberg)
Also yesterday:
Initial jobless claims increased 22k to 231k in the week ended January 31, above expectations. The four-week moving average of claims increased by 6k to 212k. Nationwide continuing claims—the number of persons receiving benefits through standard programs—rebounded 25k to 1,844k in the week ended January 24, roughly in line with consensus expectations. (GS)
Source: Department of Labor, Goldman Sachs Global Investment Research
December Job Openings crashed 386k to 6,542k, below their 2019 low. The level of job openings in November was revised down by 218k to 6,928k. JOLTS has finally dropped to the Indeed Job Postings trend, which has stabilized in recent weeks (through Jan. 30).
Goldman Sachs tries to make sense of all these indicators:
Alternative private sector data suggest job openings rose by 28k in December. We put the greatest weight on the average of the three job openings indicators (the red line in the left panel of the chart below), which stands at 7,067k in December, down 110k from November and 50k per month on average over the prior six months.
The result is a labor market still in retreat and a jobs-workers gap suggesting slower wage gains ahead.
January’s ISM Services: “the rate of job creation was only marginal and weak when compared to the survey’s long-term trend.”
S&P Global’s: “Employment rose only marginally. Consumer-facing companies are increasingly reporting a challenging environment, with demand for services falling in January having nearly stalled in December”.
Bank of Canada Gov. Macklem Warns of Misdiagnosing Economic Weakness Central banker says rate cuts aimed at lifting economy adapting to U.S. trade friction, technological advances might backfire
Further interest-rate cuts won’t necessarily help an economy that’s being pulled down by U.S. trade friction, advances in artificial intelligence and lower population growth, Bank of Canada Gov. Tiff Macklem said Thursday.
The Canadian economy is undergoing a profound structural shift, Macklem said. The central bank can help support the transition, but it’s ultimately the response from policymakers, business executives and households that will determine Canada’s future prosperity, Macklem said in a speech delivered in Toronto, the country’s financial-nerve center.
“We can be victims of U.S. tariffs and AI disruption, or we can lean into structural change, expand our internal market, diversify our trade, embrace new technology and raise our productivity,” Macklem said. (…)
His comments Thursday might reinforce a belief among analysts that the Bank of Canada is set for a prolonged hold at 2.25%, as the central bank awaits the results of a U.S.-led review later this year of the current U.S.-Mexico-Canada trade treaty, or USMCA. Historically, about 20% of Canada’s gross domestic product relies on two-way trade with the U.S. About 80% of Canadian exports enter the U.S. duty free because they comply with USMCA terms, highlighting the importance for Canada to keep the agreement intact.
In his speech, Macklem warned of years of modest growth ahead, as Canadian companies rewire their logistics networks to deal with U.S. trade policy, businesses and households address the reality of AI, and population growth stalls. Economic growth is likely to average 1.5% over the next two years, he said, adding rate cuts might not work in fueling activity.
“We have to be careful not to misdiagnose economic weakness,” Macklem said. “Monetary policy should not try to compensate for lost supply. Lowering interest rates in the face of weak economic activity risks stoking future inflation if the weakness is because of lower productive capacity rather than a cyclical downturn in demand.”
Speaking to reporters afterward, Macklem said most economic downturns reflect weakness in consumer and business demand, and the solution has tended to be additional stimulus. Given the rapid amount of structural change, however, “we need to do our best to parse out how much of this [weakness] is structural and how much of this is cyclical,” Macklem said. (…)
Macklem said rate policy “should not try to mitigate structural change. Our role is to preserve price stability while supporting the economy through the upheaval.”
Macklem said he expects tepid job creation this year. Lower population growth—due to government efforts to limit immigration and aging demographics—will likely lead to limited expansion in the labor force. As a result, “we are not expecting the unemployment rate to trend higher,” he said. As for AI, Macklem said “significant adoption” by Canadian firms appears low. “It may be a while before we see a significant impact” on productivity from AI, Macklem said.
Big Tech to Spend $650 Billion This Year as AI Race Intensifies
Four of the biggest US technology companies together have forecast capital expenditures that will reach about $650 billion in 2026 — a mind-boggling tide of cash earmarked for new data centers and the long list of equipment needed to make them tick, including artificial intelligence chips, networking cables and backup generators.
The spending planned by Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp., all in pursuit of dominance in the still-nascent market for AI tools, is a boom without a parallel this century. Each of the companies’ estimated outlay for this year would set a high-water mark for capital spending by any single corporation in any one of the past 10 years, according to Bloomberg data.
The search for a comparison to the high-flying spending projections — which came as the four reported earnings in the past two weeks — requires going back at least as far as the telecommunications bubble of the 1990s, and perhaps to the build-out of the US railroad networks in the 19th century or postwar federal investments in interstate highways or even New Deal-era relief programs.
The ever-larger numbers — in total, an estimated 60% increase from a year ago — means yet another acceleration in the wave of data center construction taking place around the world. The sprint to build these sprawling facilities, which hold racks of humming servers powered by expensive processors, has pinched energy supplies, raised worries of inflated prices for other users, and brought developers into conflict with communities worried about competition for power or water. It also raises the risk that construction spending by a narrow set of affluent companies, already accounting for a rising share of economic activity in the US, will distort big-picture economic data.
Last week, Meta said full-year capex will rise to as much as $135 billion — a potential jump of about 87%. Microsoft the same day reported a 66% increase in second-quarter capital spending, topping estimates, and analysts project it will shell out almost $105 billion in capex for the fiscal year ending in June. The news triggered the second-biggest single-day decline in market value for any stock.
Alphabet, founded in a garage south of San Francisco in 1998, on Wednesday rattled investors when it revealed a capital spending forecast that exceeded not just analyst estimates, but the spending of a vast swath of US industry — it plans to spend as much as $185 billion. And Amazon on Thursday bested that with a planned $200 billion in capital expenditures for 2026, also sending its shares tumbling in extended trading.
By contrast, the largest US-based automakers, construction equipment manufacturers, railroads, defense contractors, wireless carriers, parcel delivery outfits, along with Exxon Mobil Corp, Intel Corp., Walmart Inc. and the spun-off progeny of General Electric — 21 companies — are projected to spend a combined $180 billion in 2026, according to estimates compiled by Bloomberg. (…)
As the numbers push higher, what is still unclear is whether the companies will all be able to execute on their lofty ambitions. Since the data center build-out has escalated, they’re already competing for finite crews of electricians, cement trucks and Nvidia Corp. chips rolling out of Taiwan Semiconductor Manufacturing Co. factories. “There are and will be bottlenecks,” Luria said. (…)
OpenAI Watch
OpenAI’s rivals are gaining on its flagship product. ChatGPT’s early lead among individual users appears to be shortening as rivals like Google’s Gemini close in on its app and web market share—a shift that could complicate the company’s reported plans to IPO later this year.
OpenAI’s ChatGPT app market share plummeted from 69.1% in January 2025 to 45.3% the following year, according to data from mobile intelligence data provider Apptopi. Over the same period, Google’s Gemini chatbot app increased its market share from 14.7% to 25.2%. It’s not just OpenAI’s app market share that has taken a hit; rivals have also been gaining in terms of web traffic. On the enterprise front, Anthropic has been showing significant momentum.
According to one survey, the AI lab holds about a third of the enterprise market, compared with 25% for OpenAI and about 20% for Google Gemini.
The trends paint a picture of an increasingly competitive AI landscape with OpenAI facing challenges on multiple fronts: losing consumer market share to Google’s Gemini, contending with Anthropic’s enterprise momentum, and navigating fast-growing competitors like xAI’s Grok.
If ChatGPT’s consumer market share continues to drop, that could complicate OpenAI’s potential IPO plans—especially if Anthropic, which is reportedly considering going public, manages to go public ahead of them. (Fortune)
Nvidia-Led Boom Set to Turn Chips Into Trillion-Dollar Industry
The semiconductor industry will reach $1 trillion in revenue this year for the first time ever, fueled by artificial intelligence and the spread of computer chips to virtually every part of the economy.
Total industry sales were $791.7 billion in 2025 and are forecast to chalk up another 26% surge in 2026, according to the Semiconductor Industry Association. The market is hitting the $1 trillion milestone much faster than originally anticipated — something that bodes well for the business world at large, according to SIA Chief Executive Officer John Neuffer.
“When we have growth in our sector, it means exponential benefits in other sectors,” Neuffer said in an interview. “Our technology is foundational for pretty much every critical strategic industry. It’s a pretty good fundamental sign.” (…)
Revenue from logic chips — often described as the brains of devices — soared 40% to $301.9 billion in 2025. Sales of memory semiconductors, which help computers store and manage data, grew 35% to $223.1 billion. On a regional basis, Asia-Pacific, the Americas, Europe and China posted growth, with only Japan declining. (…)