Mixed Macro Picture: Jobs Weakening, Growth Holding Up

LPL’s Chief Economist, Dr. Jeffrey Roach discusses the transitioning job market, the indispensable role of productivity, and what is happening with government interest payments.

Last Edited by: LPL Research

Last Updated: January 28, 2026

Transcript

Jeffrey Roach (00:08):

Hi, I am Jeffrey Roach, Chief Economist for LPL Financial, with three key talking points on the current macro landscape. And the first one's this, job market is in transition. So on Tuesday, we got the latest report from the conference board, and the number of people saying that jobs are now hard to get is the highest since early 2021. I think there are a few key takeaways from this revelation, given this latest data, expect the unemployment rate to rise. My expectation is the domestic economy could approach 4.6% unemployment in Q2, and that's with upside risks later in the year from its current level of 4.4%. This will weigh on retail sales in these coming months. Second, productivity will support nominal growth. We often talk about real economic growth, so we can compare growth rates across time. However, when we want to connect the dots between economic growth and corporate earnings, we don't need to adjust for prices.

Jeffrey Roach (01:05):

Hence, the important factor is nominal growth. Despite the likelihood of rising unemployment this year, I expect nominal growth to surpass 5% due to productivity gains. What that means is labor costs are falling relative to prices, which will boost profit margins, and this is one reason why our 2026 outlook includes a fourth year of the bull. Third, weight of interest payments are dangerously high. My chart this edition is somewhat self-explanatory. In December, interest payments will take roughly 20% of total tax receipts. This is indeed a warning sign for legislators. A few consequences of this relationship between gross receipts and the cost of interest on our debt include the potential tarnishing of our Treasury market. Creating the opportunity for the economy to grow above trend in the near term should provide the support necessary to get this ratio back under control. That's all for now. If you have more insights on global market trends, follow us on social media and take care.

Navigating a Complex Economic Landscape: What the Data Reveals

In this insightful analysis, LPL's Chief Economist Dr. Jeffrey Roach unpacks three critical economic trends shaping the current macro environment — and explains why the outlook remains bullish despite emerging headwinds.

Watch this video to discover:

Why the job market is signaling a significant transition, with unemployment potentially approaching 4.6% by Q2 2026 — and what this means for consumer spending and retail sales in the coming months
How productivity gains are becoming the economy's secret weapon, driving nominal GDP growth above 5% even as labor market conditions soften, and boosting corporate profit margins in the process
The alarming trajectory of government interest payments, now consuming roughly 20% of total tax receipts — a warning sign that could impact Treasury markets and fiscal policy going forward

Despite these mixed signals, Dr. Roach maintains his conviction for a fourth consecutive year of bull market performance. Learn how productivity, growth dynamics, and market fundamentals are converging to support equity markets even as traditional employment indicators weaken.

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