The unemployment print this week was higher than expected and is signaling an upward trend in unemployment. Historically, the Sahm indicator has been used as a confirmation tool for "recession" (I use quotes because I feel the term has become more and more ambiguous in recent years) and is a measure of how unemployment is trending.
For those who are unfamiliar with the Sahm indicator--It looks at the unemployment moving average. Fundamentally, it takes a look at the lowest 3-month moving average over a 12-month period (currently about \~4.2%) and compares it to the most recent 3-month moving average. Essentially, if the current 3-month moving average is .50% (50 bps) higher than the 3-month moving average low, it produces a confirmation signal of "recession" with no historical false positives.
The current moving average of unemployment is \~4.43% which puts us north of 20 bps toward the signal. If the January 9th print is anything higher than 4.7%, there will be real concerns about the state of the economy (will put unemployment moving average at about \~40 bps above the moving average low). As of today's (12/17) price action, it looks like the market is pricing in the possibility of an accelerating unemployment trend that could continue in January's print. The Fed recently cut rates which may help reduce firing rates as cost saving measures, but January's unemployment print will be critical in understanding where the economy is at and likely where the stock market will go next.
TL;DR--If unemployment print on 1/9/26 >4.7%, risk off. If less than, likely a neutral to risk on shift.