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U.S. Labor Market Exhibits Mixed Trends Amid Fluctuating Job Growth and Layoffs

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U.S. Labor Market Volatility: Late 2024 to Early 2026 Trends

The U.S. labor market experienced a turbulent period from late 2024 into early 2026, characterized by significant shifts in job growth, layoff activity, and unemployment rates.

Periods of declining job growth and surging layoffs, alongside fluctuating unemployment rates, marked the U.S. labor market from late 2024 into early 2026.

While December 2025 saw a notable decrease in announced job cuts and stable jobless claims, January 2026 recorded the highest number of layoffs for that month since 2009. Official job reports were subject to significant downward revisions, culminating in an unexpected net job loss in February 2026.

Overview of Late 2024 Labor Market

In November 2024, estimated job openings decreased to 7.15 million, the lowest level in over a year. Hiring activity also declined to 5.12 million, the lowest since June 2024, with the hiring rate returning to 3.2%—its lowest in over a decade outside of the pandemic period. Layoff activity decreased, while voluntary separations (quits) increased. Private-sector employers, according to ADP, reported a net loss of 29,000 jobs in November.

By December 2024, ADP data indicated a rebound in private-sector hiring, with an estimated 41,000 jobs added, primarily in healthcare and education, and leisure and hospitality.

2025 Annual Labor Market Performance and Revisions

For the full year 2025, employers announced over 1.2 million job cuts, representing a 58% increase from the previous year and the highest annual total since 2020. The fourth quarter of 2025 recorded the highest number of job cuts since 2008.

Job growth for 2025 was subject to multiple, substantial revisions:

  • Initial reports indicated 584,000 jobs added, averaging 49,000 per month, a decrease from 168,000 per month in 2024.
  • An annual update by the Labor Department in early 2026, incorporating unemployment tax records, indicated approximately 900,000 fewer jobs in the economy by March 2025 than initially reported. This revision suggested an average of only 15,000 jobs added per month throughout 2025.
  • Further revisions to the 2024–2025 data in early 2026 stated the total job additions for that period were 181,000.

Regardless of the specific figures, 2025 was described as the year with the weakest employment growth since 2003 (outside of a recession) or since 2020.

December 2025 Data

December 2025 saw planned job cuts reach a 17-month low, with 35,553 positions announced for elimination. This represented a 50% decrease from November and an 8% decrease compared to December of the previous year, marking the lowest monthly total since July 2024. Simultaneously, companies announced plans to hire 10,496 workers, a nearly 16% rise from November and a 31% increase year-over-year, which was the highest monthly hiring announcement since 2022.

The Bureau of Labor Statistics (BLS) reported a seasonally adjusted increase of 50,000 nonfarm payrolls for December, falling below Dow Jones estimates. The unemployment rate decreased to 4.4% from 4.5% in November. Job openings continued to decline, reaching 6.54 million by the end of December, the lowest level since September 2020. Initial jobless claims remained stable at 208,000, and average hourly earnings increased by 0.3% for the month and 3.8% annually.

January 2026 Data

January 2026 experienced a significant surge in layoff announcements, totaling 108,435. This marked the highest total for the month since 2009, representing a 205% increase from December 2025. Concurrently, companies announced plans to hire only 5,306 workers, the lowest figure for January since 2009 and a 49% decrease from December 2025. Notable layoff announcements included over 30,000 positions by UPS and approximately 16,000 corporate-level jobs by Amazon.

Despite the rise in layoffs, the BLS initially reported an addition of 130,000 jobs in January, surpassing initial expectations, and the national unemployment rate decreased further to 4.3% from 4.4% in December. However, ADP reported that U.S. private sector firms added an estimated 22,000 jobs in January, the weakest gain in three months and the lowest for a January since 2021. Initial jobless claims for the week ending January 31 rose to 231,000, reaching their highest point since early December. Average wages in January increased by 3.7%.

February 2026 Data

The U.S. job market experienced a decline in February 2026, with employers reporting a net reduction of 92,000 jobs. The national unemployment rate increased to 4.4%. Job creation figures for December 2025 and January 2026 were also revised downwards; December's figure was adjusted to a net loss of 17,000 jobs. Average wages for working individuals increased by 3.8% compared to the previous year.

Sectoral Performance

Throughout late 2024 and into early 2026, sectoral performance varied:

  • Healthcare and Leisure & Hospitality: These sectors consistently showed growth. Healthcare employment, in particular, was often noted for its resilience. From January through November 2025, these two sectors, representing approximately 22% of total employment, accounted for 84% of total job gains.
  • Manufacturing: This sector continued to reduce its workforce, cutting 8,000 jobs in December 2025 and experiencing a downturn for ten consecutive months.
  • Retail and Professional & Business Services: These sectors also experienced job losses during certain periods.
  • Transportation and Warehousing: This industry reported job reductions in January 2026 and was significantly impacted by layoffs.
  • Federal Government: Experienced job losses over the period, despite adding some jobs in December 2025. In February 2026, it was among the sectors losing jobs.
  • Construction: Showed notable job gains in January 2026 but experienced losses in February 2026.

Reasons cited for job cuts in January 2026 included:

  • Contract loss: 30,784 (primarily from UPS)
  • Market and economic conditions: 28,392
  • Restructuring: 20,044
  • Closures: 12,738
  • Artificial intelligence: 7,624 cuts
  • Tariffs: 294 cuts

Broader Labor Market Indicators and Economic Context

Several indicators suggested a cooling labor market:

  • The Bureau of Labor Statistics' Job Openings and Labor Turnover Survey (JOLTS) for November 2024 indicated U.S. businesses sought fewer workers, and hiring activity decreased to its lowest rate in over a decade (excluding the pandemic-affected period).
  • The ratio of job openings to unemployed workers declined to less than one by December 2025, from two a few years prior.
  • Economists observed models like the Beveridge Curve, which examines the relationship between the unemployment rate and the job vacancy rate, suggesting potential deterioration if job vacancies continue to fall.

The Federal Reserve's monetary policy also reflected the evolving labor market. The Fed reduced its benchmark interest rate in December 2025 for the third time since September. However, in January 2026, most Fed policymakers voted to maintain rates.

The weaker job report for February 2026 introduced new considerations for the Federal Reserve regarding potential future interest rate adjustments. Analysts held differing views on the Fed's future actions, with some suggesting a potential for rate hikes if the job market continued to tighten, while others anticipated further rate cuts later in the year.

Data collection by the BLS faced challenges throughout 2025, including delays and data imprecision due to a 43-day government shutdown.