Tight U.S. labor market tempers Fed rate-cut hopes and keeps global stocks in consolidation mode

Global markets are trading in a consolidating, wait-and-see mode today as investors focus on how a structurally tight U.S. labor market will shape the Federal Reserve’s interest-rate path for 2026. Recent data show U.S. job openings easing from 6.9 million to 6.5 million, while manufacturing activity has strengthened, with the ISM manufacturing PMI rising back into expansion territory at 52.6. At the same time, demographic pressures—particularly a shrinking working-age population due to weaker immigration—are expected to keep labor supply constrained and unemployment low. This combination suggests the Fed may only deliver two or fewer rate cuts in 2026, a more cautious easing path than markets had previously hoped for. As a result, after strong gains in Asian markets overnight, global equities are largely consolidating rather than extending the rally, with attention turning to the delayed U.S. January jobs report due Wednesday, which could either reinforce or challenge the view of a persistently tight labor market and limited Fed easing. Overall, the tone is mildly cautious but not overtly negative, as investors balance solid economic momentum against the prospect of higher-for-longer interest rates.