The U.S. job market is heading into 2026 with some headwinds, according to JPMorgan Chase & Co. (JPM). The bank's economists expect sluggish hiring early in the year as businesses navigate tariff uncertainty, tighter immigration policies, and figure out what all that AI spending actually means for their workforce. The good news? They're forecasting things pick up later in the year.

Trade Uncertainty Keeps Employers on the Sidelines

In a forecast published earlier this month, JPMorgan economists pointed to 2025's job growth slowdown as largely a consequence of uncertainty around President Donald Trump's tariff policies and broader trade strategy. When companies don't know what their costs will look like next quarter, they tend to freeze hiring plans.

"Both long-term and short-term business planning has remained difficult, and layoff and hiring rates have been low," said Michael Feroli, JPMorgan's chief U.S. economist. Businesses are essentially in wait-and-see mode, reluctant to expand payrolls when trade rules and potential costs remain unclear.

Immigration Crackdown Squeezes Labor Supply

JPMorgan also flagged Trump's aggressive immigration enforcement as a factor reducing worker availability. Combined with a labor participation rate that's basically flat, this creates an unusual situation: monthly job gains needed to keep unemployment steady could drop to just 15,000 from the previous 50,000 threshold. The bank projects unemployment could peak at 4.5% early in the year.

Meanwhile, all that investment flowing into AI infrastructure—equipment, software, massive data centers—hasn't translated into significant job creation yet. Companies are spending billions, but the hiring boost hasn't materialized.

AI's Shadow Looms Over Employment Outlook

The AI question cuts both ways. In December, Geoffrey Hinton warned that artificial intelligence could replace millions of jobs in 2026, noting that AI capabilities were roughly doubling every seven months. Tasks that once took months can now be completed in minutes, he observed, while raising concerns about AI's potential to deceive and outpace safety guardrails.

Also in December, economist Justin Wolfers cautioned that rising unemployment, not stock market volatility, was the real recession warning signal. He connected the slowdown directly to Trump administration tariffs, which he said stalled hiring and reduced job growth, pointing to "Liberation Day" as a pivotal moment for the labor market.