Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
February 2026
Macroeconomic Overview: Estimated job gains in January were the highest in more than a year (+130,000). This figure is nearly four times the current 12-month average (+30,000), but it is still far lower than levels that were routine after the period of stimulus (job gains averaged +209,000 in 2023) and only slightly above the average from 2024 (+121,000, the average in 2025 was (+15,000).
An implication is that the latest reading stands out relative to other recent numbers on job growth. These estimates are subject to revision, and the Bureau of Labor Statistics just completed their set of annual revisions. The agency’s annual benchmarking process just indicated that there were -898,000 fewer positions in 2025 than previously estimated. These changes reinforce a narrative that the labor market has been slowing.
The labor market represents part of the Federal Reserve’s mandate, and there have been calls for the central bank to lower interest rates to encourage hiring. A transition is scheduled at the Fed, with chairman Jerome Powell’s term slated to end in May.
However, the other element of the Fed’s mandate concerns inflation. Inflation remains above the official target of two percent, with the latest reading for the price index that the central bank tracks coming in at 2.8%.
Employment: The U.S. economy is estimated to have added +130,000 jobs in January. Revisions to figures for previous months were negative, with the value for November falling -15,000 from +56,000 to +41,000 and the figure for December falling -2,000 from +50,000 to +48,000. The current twelve-month average is +30,000. One year ago, the twelve-month average was +103,000.
The unemployment rate decreased marginally, from 4.4% to 4.3%. This is the lowest reading since July, when the value was also 4.3%. In November, the rate was 4.5%.
Wages were up +3.7% year-over-year in January, matching the value from December. Apart from a dip in July 2024, these are the lowest readings since 2021. Nonetheless, these values remain higher than any values in the decade that followed the financial crisis and remain higher than the rate of inflation.
Consumer Confidence & Spending: The Conference Board’s Index of Consumer Confidence® fell -9.7 points month-over-month to 84.5 in January. The current level is the lowest since 2014, slightly surpassing the dip in April 2025 and slightly below the lowest points reached during the pandemic. For much of the past three years, values for the index were contained within a range between 95 and 115.
Government data on consumer spending have been delayed due to the shutdown, and the latest available figures are for November. In November, overall consumer spending increased +0.3% month-over-month and was up +2.6% year-over-year.
Spending on garments was up +1.2% month-over-month in November, building off another relatively strong +1.8% month-over-month increase in October. Year-over-year rates of spending on apparel have been strong for past twelve months, with year-over-year growth over five percent for each month since January 2025. In November, that growth accelerated, and reached +8.0%.
Consumer Prices & Import Data: As measured by the CPI for garments, average retail prices for clothing increased +0.4% between November and December. Year-over-year, average retail prices were also up +0.4% in December. While the current level for the CPI is higher than it has been for most of the past 25 years, it has not increased as fast as was feared given tariffs and the increases in sourcing costs.
Import volumes appear to be responding to changes in sourcing costs, however. Trade data also continue to be affected by the shutdown, but in the latest available data shipments were down -20% year-over-year in October and were down -15% in November. This followed a period of eight months (September 2024 through April 2025), when year-over-year growth averaged +15%, and a period of five months (May-September 2025), when year-over-year growth was more stable and averaged -3%.
Data describing inventories relative to sales for apparel retailers and wholesalers are published by the government. There has been more movement in the data for wholesalers in recent years, with the buildup in inventories that followed the transition from stimulus-driven confidence to inflationary fears only easing back to pre-pandemic levels around the start of 2025. More recently, wholesaler inventory/sales figures indicated some accumulation around August, but they have since moved to the lowest levels since COVID (latest data for October).
As trade deals evolve (discussed on the Monthly Economic Letter), a challenge for the supply chain will be to balance the need for replenishment against higher sourcing costs.