How high will unemployment get in 2026?
Short Answer
Both the model and the market expect unemployment to get Above 5% in 2026, with no compelling evidence of mispricing.
1. Executive Verdict
- Sluggish job growth and softening momentum will impact employment.
- Job openings per unemployed person may fall below 1.0.
- AI and technology are projected to displace jobs by late 2026.
- 37% of companies anticipate replacing jobs with AI by 2026.
- Federal Reserve's restrictive policy maintains higher interest rates.
Who Wins and Why
| Outcome | Market | Model | Why |
|---|---|---|---|
| Above 5% | 32.0% | 31.5% | Elevated inflation or prolonged high interest rates could push unemployment above 5%. |
| Above 6% | 15.0% | 15.5% | A moderate recession driven by persistent inflation and Fed tightening could see unemployment above 6%. |
| Above 7% | 9.0% | 6.5% | Significant economic contraction from aggressive Fed policy could push unemployment above 7%. |
| Above 8% | 8.0% | 5.5% | A severe economic downturn, potentially from an external shock, could drive unemployment above 8%. |
| Above 9% | 5.0% | 4.0% | Prolonged economic contraction and widespread job losses could cause unemployment to exceed 9%. |
Current Context
The U.S. unemployment rate held steady in January 2026, yet 2025 job growth was significantly revised downward. The January 2026 jobs report, released on February 11, 2026, indicated the unemployment rate remained at 4.3%, a slight decrease from December 2025's 4.4% and below market expectations [^], [^]. Total nonfarm payroll employment rose by 130,000 in January, primarily in healthcare, social assistance, and construction. However, a major development is the downward revision to 2025 employment data, now estimating only 181,000 jobs created in 2025, far less than the previously estimated 584,000. This implies an average of just 15,000 jobs per month for 2025, which has been termed a "hiring recession" for the year [^]. Weekly jobless claims for the week ending February 14, 2026, fell to 206,000, suggesting layoffs remain low [^]. Average hourly earnings increased by 3.7% year-over-year in January 2026, with real wages up 1.2%, indicating they are keeping pace with inflation [^]. The labor force participation rate remained stable at 62.5% [^].
Experts forecast mid-4% unemployment amidst ongoing recession and technological concerns. Most projections place the U.S. unemployment rate in the mid-4% range for 2026, with some, like J.P. Morgan, forecasting a peak at 4.5% in early 2026 before improving later in the year due to prospective tax cuts and Federal Reserve rate reductions [^], [^]. The Congressional Budget Office (CBO) projects a steady 4.6% in 2026, while Trading Economics expects 4.50% by the end of Q1 2026 [^], [^]. Concerns about a recession in 2026 persist, with J.P. Morgan citing a one-in-three chance [^], [^]. This is amplified by the surge in long-term unemployment (27 weeks or more) to 25.7% of total unemployed in August 2025, a level historically coinciding with or preceding recessions [^]. Discussions also revolve around the impact of AI on job displacement and the effectiveness of Federal Reserve interest rate decisions, including potential further cuts in 2026 to support employment [^], [^]. The Federal Reserve's stress test scenarios include a hypothetical severe case where unemployment rises to a peak of 10%, though this is not a forecast [^]. The Federal Open Market Committee (FOMC) held a meeting in late January, and another is scheduled for March 17-18, 2026, to discuss monetary policy [^], [^]. Despite official reports, the significant downward revisions to 2025 data and observations of a "low-hire, low-fire" environment suggest a more challenging underlying reality than initial figures might indicate [^].
2. Market Behavior & Price Dynamics
Historical Price (Probability)
Outcome probability
Date
This prediction market has exhibited a sideways trading pattern, consolidating within a relatively stable range. The price for a "YES" outcome, representing a belief that unemployment will hit a certain high threshold, has fluctuated between a low of $0.25 and a high of $0.41. While the overall trend is neutral, the market's current price of $0.31 is below its starting point of $0.35, indicating a slight decrease in perceived probability over the market's lifetime. The key technical levels to watch are the established support at the $0.25 floor and resistance at the $0.41 ceiling, both of which have contained all price action to date.
The current price near the lower end of its historical range reflects the market's reaction to recent mixed economic data. The steady January 2026 unemployment rate of 4.3% and consistently low weekly jobless claims are short-term positive signals for the labor market. These factors likely exerted downward pressure on the contract's price, as they reduce the immediate probability of a sharp unemployment spike. However, the significant downward revision of 2025's job growth introduces a bearish long-term outlook. The market's current pricing at 31% suggests that traders are currently weighing the resilient headline numbers more heavily than the underlying weakness implied by the historical data revisions. The lack of a major price move following this news indicates trader indecision.
The total volume of over 115,000 contracts suggests the market is liquid and has attracted significant interest. However, without time-stamped volume data, it is difficult to determine market conviction during specific price swings. Overall, the chart suggests a market sentiment of uncertainty. The 31% probability implies traders are more skeptical than not that unemployment will reach the resolution threshold, but the persistent sideways movement within the established range indicates a lack of a strong catalyst or consensus to drive a definitive trend. The market appears to be in a holding pattern, awaiting clearer economic signals to break out of its current support and resistance levels.
3. Market Data
Contract Snapshot
Based on the provided page content, the rules for YES resolution, NO resolution, key dates/deadlines, and special settlement conditions are not available. The content only provides the market title and navigation links.
Available Contracts
Market options and current pricing
| Outcome bucket | Yes (price) | No (price) | Implied probability |
|---|---|---|---|
| Above 5% | $0.32 | $0.69 | 32% |
| Above 6% | $0.15 | $0.86 | 15% |
| Above 7% | $0.09 | $0.97 | 9% |
| Above 8% | $0.08 | $0.97 | 8% |
| Above 10% | $0.05 | $0.98 | 5% |
| Above 9% | $0.05 | $0.97 | 5% |
| Above 12% | $0.04 | $0.98 | 4% |
| Above 15% | $0.04 | $0.98 | 4% |
| Above 17% | $0.04 | $1.00 | 4% |
| Above 20% | $0.03 | $0.99 | 3% |
Market Discussion
Discussions and debates about unemployment in 2026 largely revolve around a projected "low-hire, low-fire" labor market, with many experts forecasting the U.S [^]. unemployment rate to stabilize or tick up slightly, generally in the mid-4% range, such as JPMorgan's prediction of a 4.5% peak in early 2026 and the Federal Reserve's median projection of 4.4% for the year-end [^]. Key arguments suggest that factors like decreased labor supply due to population shifts and slower immigration, ongoing business uncertainty from tariffs, and the growing impact of artificial intelligence could contribute to this trend [^]. However, more pessimistic viewpoints, particularly in social media discussions, express concern about a "jobless boom" or "jobless bubble" driven by AI leading to significant white-collar job displacement and higher "real" unemployment rates than official figures suggest [^].
4. What Was the Outcome of the Research Request?
| Research Status | Failed (Internal Server Error) |
|---|---|
| Data Availability | None Retrieved |
| Summary Capability | Unable to provide |
A technical issue prevented the retrieval of all research findings. An internal server error occurred during the research request process, which directly prevented the system from accessing and retrieving any specific findings or underlying data. This included information pertinent to the BLS's establishment survey components, such as the 'birth/death model' adjustments for Q4 2025 and Q1 2026.
The technical error precludes analysis and answering the research question. Consequently, due to the system's inability to access the necessary information, it was not possible to process or analyze any data. This technical limitation meant that key data points could not be extracted, a summary could not be generated, and definitive answers to the intended research question regarding the BLS payroll data revisions could not be provided at this time.
5. Why Was Information Extraction Unsuccessful Due to Server Error?
| Research Status | Failed (Internal Server Error) |
|---|---|
| Data Availability | No data extracted |
| Finding Details | Unavailable |
Research execution failed due to an internal server error. The research query encountered an Internal Server Error, which prevented the successful retrieval and processing of information. This technical issue meant the system was unable to access or process the necessary data sources for the intended research.
No specific findings or analytical summaries were generated. Consequently, no specific findings, data points, or analytical summaries could be generated from the intended research topic. The questions posed for this section, concerning labor market indicators cited in FOMC minutes and speeches and their deviation from historical dovish pivot thresholds, therefore remain unanswered.
No actionable insights or key metrics are available. Due to this technical impediment, there are no actionable insights or key metrics to present at this time,.
6. What Information is Available Due to Research Error?
| Research Status | Internal Server Error |
|---|---|
| Data Availability | None |
| Key Findings | Unable to extract |
A technical issue prevented the retrieval of specific research findings. An internal server error occurred during the research process, which consequently prevented the retrieval of specific findings for the question concerning net employment change within the 'Temporary Help Services' sector. This technical impediment meant that no data points or detailed insights could be extracted regarding recent trends or comparisons to declines observed before the 2008 and 2020 recessions.
No current summary of key information or statistics is possible. Due to this technical issue, it is currently not possible to provide a summary of key information or relevant statistics for the requested analysis. Addressing the research question will require further attempts to obtain the desired content and overcome the initial technical obstruction.
7. What Caused the Research Request to Fail?
| Research Status | Failed |
|---|---|
| Error Type | Internal Server Error |
| Outcome | No data available |
The research request could not be completed due to a server error. An 'Internal Server Error' occurred on the server side during processing, which prevented the retrieval of any relevant information.
No specific findings or detailed analysis are available. As a direct consequence of this error, no specific findings, data points, or detailed analysis can be provided based on the query. Further attempts or system diagnostics would be necessary to resolve the underlying issue and obtain the requested research.
8. Why Is Specific Research Data Currently Unavailable?
| Research Status | Failed (Internal Server Error) |
|---|---|
| Data Availability | Not Applicable |
| Key Findings | None extracted |
No research findings were retrieved due to an internal server error. The research process encountered a technical issue, specifically an internal server error, which prevented the retrieval of any specific findings for the requested question. Due to this technical impediment, no data points or comprehensive insights could be gathered or analyzed.
Consequently, no conclusions can be drawn or summarized at this time. The inability to access the necessary information means there are no details to report regarding the topic of interest. Therefore, no definitive conclusions can be drawn or summarized. Further attempts to research the question would be required once the server issue is resolved.
9. What Could Change the Odds
Key Catalysts
The potential for a higher peak unemployment rate in 2026 is driven by several key factors. Persistent weakness in the labor market, characterized by sluggish job growth and softening momentum, could see the unemployment rate tick upwards as job openings per unemployed person fall below 1.0 [^]. A significant concern is job displacement by AI and technology, with 37% of companies anticipating replacing jobs by the end of 2026, particularly impacting routine and entry-level roles [^]. Furthermore, a more restrictive monetary policy from the Federal Reserve, potentially maintaining higher interest rates or reducing them less aggressively than anticipated, could curb economic growth and lead to job losses; J.P. Morgan Global Research, for instance, no longer expects Fed rate cuts in 2026 [^]. Escalations in geopolitical tensions or trade wars, alongside potential financial market shocks, or a resurgence of inflation contributing to stagflation risks, would further complicate the economic landscape and could push unemployment higher [^].
Conversely, a lower peak unemployment rate in 2026 is plausible if several other catalysts materialize. More aggressive Federal Reserve rate cuts than currently anticipated could ease financial conditions, stimulate economic activity, and support job creation, especially in the latter half of the year [^]. Positive impacts from prospective tax cuts, such as those from the 2025 reconciliation act, and potential fiscal stimulus could also boost overall economic activity and job growth [^]. Stronger-than-expected productivity gains from AI, where AI augments rather than replaces human labor, could drive economic expansion and create new, higher-skilled jobs, keeping unemployment low [^]. Resilient consumer spending, fueled by stable real wages, combined with robust business investment (particularly in AI-related technologies), would provide a solid foundation for market stability. A faster and more definitive decline in inflation toward the Fed's 2% target would give the central bank greater flexibility for accommodative monetary policy, further supporting employment [^].
Key Dates & Catalysts
- Expiration: March 09, 2027
- Closes: January 08, 2027
10. Decision-Flipping Events
- Trigger: The potential for a higher peak unemployment rate in 2026 is driven by several key factors.
- Trigger: Persistent weakness in the labor market, characterized by sluggish job growth and softening momentum, could see the unemployment rate tick upwards as job openings per unemployed person fall below 1.0 [^] .
- Trigger: A significant concern is job displacement by AI and technology, with 37% of companies anticipating replacing jobs by the end of 2026, particularly impacting routine and entry-level roles [^] .
- Trigger: Furthermore, a more restrictive monetary policy from the Federal Reserve, potentially maintaining higher interest rates or reducing them less aggressively than anticipated, could curb economic growth and lead to job losses; J.P.
12. Historical Resolutions
Historical Resolutions: 1 markets in this series
Outcomes: 0 resolved YES, 1 resolved NO
Recent resolutions:
- U3MAX-22-P6.0: NO (Jan 06, 2023)
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