U.S. Labor Market Shows Mixed Trends and Fluctuations from Late 2024 Through Early 2026

U.S. Labor Market Navigates Volatility from Late 2024 to Early 2026

The U.S. labor market experienced varied trends from late 2024 through early 2026, characterized by decelerating hiring, fluctuating job openings, and notable shifts in layoff activity. While late 2024 and parts of 2025 indicated a moderation in labor market activity and slower job growth, early 2026 saw a significant surge in announced layoffs alongside revisions to historical employment data.

Unemployment rates generally remained low but showed some oscillation, and economists presented differing views on the market's stability and future trajectory.

Moderation and Deceleration: Late 2024 Trends

Data for late 2024 indicated a moderated labor market, with key indicators pointing to slower activity.

• Job Openings: In November 2024, estimated job openings decreased to 7.15 million, from 7.45 million the previous month, marking the lowest level in over a year. This reduction was observed across most industries, with exceptions in retail and construction.
• Hiring Activity: November 2024 saw an estimated 5.12 million new hires, down from 5.37 million in October, representing the lowest hiring level since June 2024. The hiring rate returned to 3.2%, matching its lowest rate in over a decade outside the pandemic period.
• Net Job Gains: Specific industries recorded minimal net job gains in November 2024, including information (+12,000 jobs), federal government (+11,000 jobs), and construction (+11,000 jobs).
• Layoffs and Quits: Employee layoffs decreased in November 2024, while voluntary separations (quits) increased. The overall trend suggested reduced hiring and firing activity and a deceleration in turnover.
• Private Sector Hiring (December 2024): Private-sector employers added an estimated 41,000 jobs in December 2024, following a net loss of 29,000 jobs in November. Job gains were primarily in health care and education (+39,000 jobs) and leisure and hospitality (+24,000 jobs). The largest net job losses occurred in professional and business services (-29,000 jobs) and the information sector (-12,000 jobs). Businesses of all sizes reportedly added jobs, a shift from November when smaller firms experienced a decrease.
• Wage Growth (November 2024): Pay gains for individuals remaining in their jobs held steady at 4.4%. Wage increases for those changing jobs accelerated to 6.6% from 6.3%.

Annual Review and Fourth Quarter 2025: Slowdown and Revisions

The U.S. labor market concluded 2025 with lower-than-expected job creation and significant revisions to previous months' data.

• December 2025 Job Growth: Nonfarm payrolls increased by a seasonally adjusted 50,000 for December 2025, according to the Bureau of Labor Statistics (BLS). This figure was below the downwardly revised 56,000 for November.
• Unemployment Rate: The unemployment rate decreased to 4.4% in December 2025, surpassing a forecast of 4.5%. A broader measure, including discouraged workers and those working part-time for economic reasons, declined to 8.4%.
• Annual Job Creation (2025): For the full year, BLS data indicated payroll gains averaged 49,000 per month, a decrease from 168,000 in 2024. Employers added 584,000 jobs in 2025, marking the slowest employment growth since 2020. Another estimate projected total job gains for 2025 at 710,000, while Federal Reserve Governor Chris Waller stated that on average, employers added 15,000 jobs per month throughout 2025.
• Announced Layoffs: Announced layoffs reached a 17-month low of 35,553 planned job cuts in December 2025, representing a 50% decrease from November. However, for the full year 2025, employers announced over 1.2 million job cuts, an increase of 58% from the previous year and the highest annual total since 2020. The fourth quarter recorded the highest number of job cuts since 2008.
• Announced Hiring Plans: Companies announced plans to hire 10,496 workers in December 2025, a nearly 16% rise from November and a 31% increase year-over-year, marking the highest hiring announcements since 2022.
• Job Openings: Estimated job openings decreased to 6.54 million in December 2025, the lowest level since September 2020.
• Wage Growth: Average hourly earnings increased by 0.3% for the month, with an annual increase of 3.8%. The average workweek shortened to 34.2 hours.
• Prior Revisions: November's payroll number was revised down by 8,000, and October's loss was adjusted to 173,000, from an earlier estimate of 105,000. Job gains for October and November were also revised down by a total of 76,000.

Early 2026: Surge in Layoffs and Fluctuating Job Numbers

The beginning of 2026 brought a significant surge in layoff announcements and fluctuations in job creation.

• January 2026 Job Creation: The U.S. labor market added 130,000 jobs in January, according to the Labor Department, surpassing initial expectations. Conversely, US private sector firms added an estimated 22,000 jobs in January, according to ADP, marking the weakest gain in three months and the lowest for a January since 2021.
• February 2026 Job Creation: Employers reported a reduction of 92,000 jobs in February, despite economists' expectations for continued growth.
• Unemployment Rate: The national unemployment rate decreased to 4.3% in January 2026 from 4.4% in December 2025, before increasing to 4.4% in February 2026. The unemployment rate for African Americans also declined but remained at 7.2% in January.
• January 2026 Layoff Announcements: US employers announced 108,435 layoffs in January, marking the highest total for the month since 2009. This represented a 118% increase from January of the previous year and a 205% rise from December 2025.
  • Approximately 40% of these announcements were from Amazon (16,000 cuts) and UPS (30,000 cuts), with UPS's cuts linked to the termination of its delivery arrangement with Amazon.
  • Other significant layoffs occurred in the transportation, technology, healthcare and health products, chemical, and financial sectors.
  • Key reasons cited included contract loss (30,784), market and economic conditions (28,392), restructuring (20,044), closures (12,738), artificial intelligence (7,624), and tariffs (294).
• January 2026 Hiring Announcements: Companies announced plans to hire 5,306 workers in January, the lowest figure for the month since tracking began in 2009. This represented a decrease of 13% from January 2025 and 49% from December 2025.
• Initial Jobless Claims: Initial jobless claims for the week ending January 31 totaled 231,000, an increase of 22,000 from the prior week and an eight-week high.
• Wage Growth: Average wages in January 2026 increased by 3.7%, a slight decrease from the 3.8% gain recorded in December 2025. Average wages for working individuals increased by 3.8% in February compared to the previous year.

Sectoral Performance: Growth and Decline

Throughout the period, specific sectors demonstrated varying levels of resilience and vulnerability.

• Growth Sectors: Healthcare and leisure and hospitality consistently showed job gains, with these two sectors collectively representing approximately 22% of total employment and accounting for 84% of total job gains from January through November 2025. Health care and construction also experienced notable job gains in January 2026.
• Declining Sectors: Retail experienced job declines, losing 25,000 jobs in December 2025. Manufacturing continued to reduce its workforce, cutting 8,000 jobs in December 2025, marking a downturn for ten months. Manufacturing, construction, and federal government employment experienced job losses in February 2026. The transportation and technology sectors recorded significant job cuts in January 2026.

Economic Context and Federal Reserve Policy

Economic data and labor market trends significantly influenced Federal Reserve interest rate considerations.

• Economic Growth: The Atlanta Fed's measure of economic data suggested a 5.4% annualized GDP increase in the fourth quarter of 2025, following a 4.3% rise in the third quarter. Consumer spending during the holiday season was strong, with online spending rising 6.8% from the previous year to a record $257.8 billion.
• Interest Rate Decisions: The Federal Reserve reduced its benchmark interest rate in December 2025 for the third time since September 2025, in response to a weakening job market. Following the January 2026 job numbers, some analysts suggested the Federal Reserve might be less likely to implement further rate cuts, based on the theory that a strong economy reduces the need for additional monetary easing. The CME FedWatch index indicated a 92% probability of the Federal Reserve maintaining rates at 3.5% in March and a 78% probability through April, with a 50% chance of a rate cut projected for June. Federal Reserve Governor Chris Waller had advocated for a rate reduction in December 2025, but most Fed policymakers voted to maintain rates in January 2026. The weaker February 2026 job report introduced new considerations for the Federal Reserve regarding potential further rate cuts.

Economist Perspectives and Broader Indicators

Economists presented varied interpretations of the labor market's condition and future outlook.

Heather Long, chief economist at Navy Federal Credit Union, described 2025 as a "hiring recession," noting that the annual payroll gain of 584,000 for 2025 represented the weakest year outside of a recession since 2003.

• Deterioration Risks: Neil Dutta, chief U.S. economist at Renaissance Macro Research, stated in December 2025 that downside risks to the labor market were higher than upside risks for inflation. Matt Bush, U.S. economist at Guggenheim Investments, noted that while the labor market was expected to remain stable short-term, the threat of rising unemployment persisted, with recession risk "well above normal."

• Key Indicators:

  • Beveridge Curve: This model, which examines the relationship between unemployment and job vacancy rates, suggested a potential deterioration, with a falling job vacancy rate (4.6%) indicating increasing difficulty in finding work.
  • Jobs-Workers Gap: This indicator, tied to the Beveridge curve, turned negative by late 2025, signifying more workers than available jobs.
  • Unemployment Rate and Moving Average: The unemployment rate recently exceeded its three-month moving average, an event historically observed before or during recessions.
  • Job Openings to Unemployed Workers Ratio: This ratio declined to less than one by December 2025, from two a few years prior.
  • Employer Outlook: High January 2026 layoff figures were interpreted by some analysts as reflecting a less optimistic outlook for 2026 among employers.

Data Revisions and Reporting Challenges

The reliability and interpretation of labor market data were subject to revisions and reporting challenges throughout this period.

• Government Shutdown Impact: The year 2025 presented challenges for the BLS, including data collection and report delays due to a 43-day government shutdown. Previous months' employment data for October and November 2025 were affected by this shutdown, leading to some data imprecision, and the January 2026 report was also delayed.
• Annual Revisions: A Labor Department annual update, which incorporates more accurate data from unemployment tax records, indicated approximately 900,000 fewer jobs in the economy by March 2025 than initially reported. The BLS also revised downward its previously reported job numbers for 2024–25, stating the figure was 181,000, not 584,000. Employment gains for November and December 2025 were revised downward by a total of 17,000 jobs, with December 2025 eventually indicating a net loss of 17,000 jobs after revisions.
• Data Accuracy Concerns: Some analysts expressed concern that reported job creation figures might be inaccurate or subject to future downward revisions. Samuel Tombs and Oliver Allen of Pantheon Macroeconomics described the reported 130,000 jobs in January 2026 as "implausible" and attributed the significant increase to a statistical model for data collection.