U.S. Job Market Slows in 2025 Amid Weak Hiring and Rising Unemployment
The year 2025 marked a period of significant deceleration in the U.S. job market, with hiring activity reaching its slowest pace in over a decade, excluding the initial months of the COVID-19 pandemic. This environment has presented challenges for job seekers across various demographics and sectors.
Employment Growth and Unemployment Rates
Official data from the Bureau of Labor Statistics (BLS) indicates that the U.S. economy added approximately 50,000 new jobs per month since May. When accounting for federal workforce adjustments, this figure reduces to about 17,000 new jobs per month, representing the weakest stretch since 2010, excluding early pandemic periods. Federal Reserve Chair Jerome Powell has suggested that BLS figures might be overstating new job tallies by approximately 60,000 per month, pending future data revisions.
The unemployment rate in November reached 4.6 percent, an increase of 0.6 percentage points since January. While this figure remains historically low, a "low-churn" environment persists, characterized by employers neither extensively firing nor hiring workers. Layoffs have shown a slight increase from 2024 levels but remain below those recorded in 2019.
Hiring Trends and Demographic Impacts
The nationwide hiring rate, which measures employer headcount growth, decreased to levels last observed during the post-Great Recession period in 2013, based on a six-month rolling average. This trend has contributed to a divergence in economic experience:
- Employed Individuals: Workers who maintained their positions saw median wage growth of 3.8 percent this year, exceeding the inflation rate, according to the Federal Reserve Bank of Atlanta.
- Unemployed Individuals: Job seekers have faced increased difficulty securing employment.
The decline in the hiring rate predominantly occurred between 2022 and mid-2024, with a slight further decrease this year. Specific demographic groups have experienced a more pronounced impact:
- Unemployment has risen faster among young college graduates compared to young workers without a bachelor's degree, with rates for the former resembling 2013 levels.
- The unemployment rate for Americans with advanced degrees reached its highest average in at least a decade during the third quarter, excluding early pandemic months.
- The unemployment rate among Black Americans has also seen a rapid increase.
Sector-Specific Performance
Several sectors, particularly those with a high concentration of white-collar workers, reported job losses over the past six months, including:
- Information (encompassing many technology companies)
- Financial activities
- Professional and business services
The manufacturing industry has also experienced job shedding, with its unemployment rate increasing faster than the broader economy.
Conversely, some sectors have continued to expand. Healthcare and private education collectively added 345,000 jobs over the past six months, accounting for most net job growth in the economy.
Factors Contributing to the Slowdown
Economists attribute the job market slowdown to several potential factors, occurring despite healthy economic growth (Gross Domestic Product recorded its best quarter since late 2023):
- Immigration Policies: Changes in immigration enforcement policies have been cited as a factor weighing on overall job growth, particularly in industries reliant on non-native workers such as construction. Estimates suggest that without immigrant workers, job creation might be limited to 50,000-75,000 jobs per month.
- Tariffs: Trade tariffs introduced by the current administration are believed to have contributed to struggles in tariff-exposed industries like manufacturing and wholesaling, with job creation declining after their announcement in April.
- Monetary Policy: The Federal Reserve's approach to interest rate adjustments has been suggested as a factor influencing hiring decisions.
- Policy Uncertainty: A May survey by the Atlanta Fed indicated that approximately 40 percent of companies were scaling back hiring plans due to uncertainty regarding government policies, with tariffs, federal spending, monetary policy, and regulations being cited.
- Post-COVID Overhiring Correction: Some economists propose that companies are currently adjusting after a period of aggressive hiring during the economy's reopening from COVID-19, leading to a natural period of slower hiring.
- Artificial Intelligence (AI): AI was cited as a factor in approximately 55,000 layoffs this year. Research also suggests that large language models may have reduced entry-level hiring in fields such as computer coding and marketing.
Outlook
Projections for the coming year indicate a potentially more challenging hiring environment for college graduates. A recent ManpowerGroup survey of 6,000 businesses showed little change in the share of companies planning to hire in the near future. The rising unemployment rate among Black Americans is noted as a potential leading indicator for broader labor market trends.