Bloomberg Talks: "Veronica Clark Talks Market Expectations for 2026"

Date: December 29, 2025
Host: Bloomberg
Guest: Veronica Clark, Citigroup Global Markets

Episode Overview

This episode features Veronica Clark from Citigroup Global Markets discussing the state of the U.S. labor market, recent economic data anomalies, expectations for Federal Reserve actions in early 2026, and the complex interplay between monetary policy, labor trends, and fiscal stimulus. The conversation delves into persistent labor market weakness, the impact of rate sensitivity across business sectors, and the growing divergence between different segments of the U.S. economy.

Key Discussion Points and Insights

1. Skepticism About Recent Labor Data

• Validity of October/November Data:
  • Recent labor market numbers, especially for October and November, are subject to skepticism due to measurement issues, possibly worsened by a government shutdown.
  • Quote:
    • “There's a lot of issues with the November October data. We don't know how much the government shutdown affected the measurement... December should be relatively clean.”
      — Veronica Clark [00:44]
• December Unemployment Rate Expectations:
  • A potential rise to 4.7% in December’s unemployment is seen as more reliable and may signal genuine labor market weakness.
  • Quote:
    • “If it stays pretty high, I think that's a more concerning sign for people.”
      — Veronica Clark [01:00]

2. Explaining Labor Market Weakness

• Weakness Despite Strong Corporate Earnings and Low Immigration:
  • There’s confusion about why the labor market is weak given high earnings and restricted immigration.
  • Guest Analyst:
    • "I don't get it. Because you've got incredible earnings growth... There are no new people coming into this country... Companies are fighting for employees." [01:07]
• Labor Demand vs. Labor Supply:
  • The prevailing explanation is weakening labor demand rather than issues with labor supply; increased unemployment is mainly due to low hiring, not firing.
  • Quote:
    • “Labor demand has just weakened more than labor supply. And that's why you've seen the unemployment rate rising. It's this low hiring, still low firing dynamic.”
      — Veronica Clark [01:33]

3. Role of Productivity and Technology

• Is Tech Driving Current Trends?
  • Skepticism that current productivity gains from technology are the main driver; the shift began in summer 2023 and is rooted in rate-sensitive sectors.
  • Quote:
    • “I'm a little hesitant to conclude that that's what's happening now. That might be part of the story... but this really started maybe summer of 2023.”
      — Veronica Clark [02:14]
• Manufacturing Pullback:
  • The pullback in hiring is most evident in manufacturing and small businesses, which are more sensitive to interest rates.
  • Quote:
    • “It started in more rate sensitive sectors like manufacturing. Small businesses, the pullback has really been there.” — Veronica Clark [02:24]

4. Manufacturing Jobs and Rate Sensitivity

• Reshoring vs. Reality:
  • Despite political narratives about reshoring, the U.S. continues losing manufacturing jobs, a trend predating recent years and propelled by rate impacts.
  • Quote:
    • “We have been losing manufacturing jobs I think every month this year. But that predates this year also, and it is a rate sensitive sector.”
      — Veronica Clark [02:47]

5. Economic Bifurcation and ‘K-shaped’ Recovery

• Winners and Losers:
  • Clear bifurcation exists across sectors; larger firms and high-income consumers remain robust while small businesses and rate-sensitive sectors suffer.
  • Quote:
    • “There's this bifurcation across all parts of the economy... the smaller businesses who are more rate sensitive, I think rates are restrictive here.”
      — Veronica Clark [03:13]
• Contradictory Signals:
  • High-profile bankruptcies coincide with thriving firms striking large deals, highlighting this divergence.

6. Federal Reserve Policy Outlook for 2026

• Likelihood of Rate Cuts:
  • If the unemployment rate hits 4.7% in December, Clark expects the Fed to cut rates in both January and March.
  • Quote:
    • “We are penciling in another cut in January, another one in March. And it's just this kind of idea that you have clearly gotten more concerned on the labor market side of your mandate.”
      — Veronica Clark [03:41]
  • The Fed’s mandate to balance inflation and employment could tip further towards employment concerns if reliable data supports labor market softness.

7. Risks of Reigniting Inflation

• Potential Stimulus & Loose Policy:
  • The host questions if dual rate cuts, generous tax refunds, and new fiscal stimulus in early 2026 could rekindle inflation.
  • Quote:
    • “Don't you risk reigniting inflation that never died?”
      — Host [04:17]
• Clark’s Perspective:
  • Clark doesn’t see an immediate inflation risk, particularly since housing costs (usually first to reflect resurgent demand) are slowing.
  • The lag in shelter inflation will continue to suppress headline inflation throughout the year.
  • The real determinant for spending remains labor income—and that’s already decelerating.
  • Quote:
    • “I'm not so concerned about that right now. The main determinant of if people are spending or not is if they have a job and what their labor income is, and that we have seen slowing already.”
      — Veronica Clark [04:33]

Notable Quotes & Memorable Moments

• On data skepticism:
  • “There's a lot of issues with the November October data. We don't know how much the government shutdown affected the measurement...” — Veronica Clark [00:44]
• On labor market dynamics:
  • “Labor demand has just weakened more than labor supply... low hiring, still low firing dynamic.” — Veronica Clark [01:33]
• On bifurcation:
  • “There's this bifurcation across all parts of the economy.” — Veronica Clark [03:13]
• Fed’s direction for 2026:
  • “We are penciling in another cut in January, another one in March.” — Veronica Clark [03:41]

Important Timestamps

• 00:44 – Data skepticism and year-end unemployment projections
• 01:07 – Questioning why labor is weak despite strong fundamentals
• 01:33 – Weakening labor demand identified as primary issue
• 02:14 – Productivity and technology’s role assessed
• 02:47 – Manufacturing jobs continue to decline
• 03:13 – K-shaped recovery and bifurcation of the economy
• 03:41 – Fed policy expectations: rate cuts ahead
• 04:17 – Inflation risks in light of dovish monetary and fiscal policy
• 04:33 – Clark’s stance: Labor income is the core concern for consumer health

Conclusion

Veronica Clark, representing Citigroup, provides a cautious but clear-eyed view of the U.S. economy as 2026 approaches: labor market weakness is deeply rooted in softening demand, not a supply crisis, and upcoming rate cuts are likely as the Fed pivots toward its employment mandate. She’s less worried about inflation, citing cooling housing markets and the primacy of income in driving consumption, but warns that continued low hiring could eventually break the balance and lead to layoffs. The episode balances technical analysis with practical economic storytelling, giving listeners a clear sense of the major crosscurrents shaping policy and markets in early 2026.