Don’t bet on lots of hiring and new jobs in 2026 — or lots of layoffs, either
Labor market has cooled off, but it’s not in a deep freeze
If you are searching for work—or simply watching the economy closely—the U.S. labor market in 2025 offers little reassurance. Hiring has slowed sharply, and economists are increasingly debating whether the country is drifting into a “jobless expansion”: an economy that continues to grow but generates very few new jobs.
“Job growth in 2026 is likely to be notably more subdued than in 2025 and the preceding expansion years,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
A Mixed Jobs Report
At first glance, the most recent labor market data does not look disastrous. The November jobs report, delayed by the government shutdown, showed that private employers added an average of 75,000 jobs per month from September through November. That was a clear improvement from the meager 13,000 monthly average recorded over the summer.
The unemployment rate, however, climbed to 4.6%, its highest level in four years. Economists caution against reading too much into that increase. Shutdown-related disruptions and the delayed departure of roughly 160,000 federal workers who accepted buyouts earlier in the year likely distorted the numbers.
“Unemployment is rising, but the labor market isn’t breaking,” said Matthew Martin, a senior U.S. economist at Oxford Economics.
Even at 4.6%, unemployment remains low by historical standards. Notably, the U.S. has never entered a recession without the jobless rate exceeding 5%. Federal Reserve officials echo that view, with New York Fed President John Williams recently stating there are “no signs of a sharp deterioration” in the labor market.
The Real Problem: Where the Jobs Aren’t
Beneath the surface, the picture is far less encouraging.
As of November, the U.S. had created just 786,000 private-sector jobs in 2025—the weakest performance in 16 years, excluding the pandemic. In every other year during that period, job creation was two to three times higher.
Even more concerning is how narrowly concentrated those gains have been. Nearly all new jobs this year were created in healthcare and social services, including child and elder care. Outside of those areas, hiring has been largely stagnant—an unusual and troubling pattern for a growing economy.
Are We Below the Break-Even Point?
Economists often focus on the “break-even” rate of job creation—the number of jobs needed each month to absorb new entrants into the labor force, such as graduates, immigrants, and returning workers. Most estimates place that figure between 40,000 and 60,000 jobs per month.
If hiring consistently falls below that range, unemployment tends to rise, and public confidence in the economy weakens.
Technically, the U.S. may still be hovering near that break-even threshold. But consumers are not optimistic. According to the University of Michigan’s December consumer sentiment survey, a large majority of Americans expect unemployment to rise further in 2026.
Why Hiring Is Under Pressure
Several forces are weighing on job growth:
Post-pandemic overhiring: Many companies expanded aggressively after COVID-19 and are now pulling back.
Policy uncertainty: High tariffs and shifting trade policies have made businesses reluctant to commit to new hires.
Tighter immigration: Reduced immigration has shrunk the available labor pool, particularly in lower-wage industries like hospitality and food service.
Artificial intelligence: Growing adoption of AI is reducing the need for additional workers in some roles.
Together, these factors help explain why hiring has slowed even as the broader economy continues to expand.
A More Optimistic View
Not all economists are pessimistic. Some argue that job growth could stabilize—or even improve—in 2026 if economic conditions strengthen.
They point to lower taxes, reduced regulation, and the possibility that tariffs could be eased, giving businesses greater clarity and confidence. The Federal Reserve is also attempting to support the labor market, having cut interest rates three times since September, with more reductions likely next year.
Whether the pessimists or optimists are right, one conclusion is hard to escape: the era of rapid job growth is over, at least for now.
From 2011 through 2024, the U.S. added roughly 2 million jobs in nearly every year, excluding the pandemic. Those levels of hiring are unlikely to return anytime soon. For workers and employers alike, the labor market of the next few years may be defined not by collapse—but by stubbornly slow growth.