Economic and labor market uncertainty remains pervasive as the calendar turns to 2026. Tariff policy is still unsettled, immigration has decreased, and labor mobility appears stalled. Compounding these challenges, delayed or missing government data releases have obscured an already murky view of underlying economic conditions.
The forecast for 2026 will not be dramatically different than what was experienced in 2025, according to experts. Indicators point to continuity rather than disruption, with job openings, hiring, and unemployment hovering near current levels. The most likely scenario is a prolonged “low-hire, low-fire” environment marked by caution, uneven demand across industries, and persistent policy uncertainty.
“It is not expected to be a booming labor market, nor is it expected to be a crashing labor market,” said Justin Ladner, senior labor economist at SHRM. “It’s frozen. Slow hiring, slow quitting, a low level of layoffs — very little movement. The big question heading into the new year is whether that tension is going to break in any direction.”
Nicole Bachaud, labor economist at ZipRecruiter, foresees a gradual uptick in hiring in 2026, but otherwise characterized the year ahead as “slow and steady.”
The 2026 labor market won’t snap back overnight and that might be good news, Bachaud said. “Instead of the dramatic surge seen during the post-pandemic hiring boom — which led to subsequent years of headcount reductions — this year we’ll likely see a more gradual pickup in hiring activity,” she said. “The low-hire, low-fire environment that defined much of 2025 will persist into early 2026, but with a crucial difference. While demand will pick up gradually, it will soon run headfirst into a wall of constrained labor supply.”
The labor market still has a way to go before a broader recovery begins, said Noah Yosif, chief economist at the American Staffing Association. “Lower interest rates and immigration-induced labor shortages will provide employers with the capital and opportunities to add headcount, but these changes will take time to filter through the economy,” he said. “Layoffs are consistent with the current unemployment rate, and employers remain hesitant to hire as a result of elevated labor costs owing to inflation; changing workforce needs induced by artificial intelligence; and uncertain economic conditions driven in part, by current trade policy.”
Hiring on Two Tracks
Experts point out that the labor market is increasingly bifurcated. “Health care is adding jobs, while leisure and hospitality, retail, manufacturing, and transportation are shedding them,” said Lisa K. Simon, chief economist at Revelio Labs.
She added that job postings overall continue to fall. “Postings have been down for 12 consecutive months, driven by employer uncertainty, tariff pressures, and general cautiousness rather than supply-side constraints,” she said.
Ladner agreed that the labor market as a whole doesn’t characterize every industry. “Health care has stood out as a sector with an intense amount of demand, while other parts of the labor market have clearly cooled off, especially entry-level roles in white collar occupational groups,” he said.
The emergence of AI has hit entry-level workers hard, Simon said. “Entry-level occupations with high AI exposure are seeing the biggest demand declines,” she said, such as consulting firms cutting junior roles and training AI agents while still hiring senior consultants, for example.
Bachaud said that sectors driven by demographic demand like health care and construction will continue to see strong hiring growth in 2026 while industries driven by cyclical movement like manufacturing, transportation, and hospitality will continue to experience more volatility.
“Of the roughly 610,000 jobs added to the U.S. economy in 2025 through November, around 65% were in the health care sector,” she said. “Job seekers in nursing, home health care, and health care support roles will find abundant opportunities as demographic demand surges, but the industry’s ability to scale its workforce will depend heavily on maintaining accessible pathways to medical education and training. Workers already in the field could see strong job security but may face burnout as the supply is stressed.”
On the other hand, the impact of tariffs is not getting clearer for businesses and that uncertainty will continue to negatively impact manufacturing and transportation, she said.
U.S. businesses are feeling the ripple effects of tariffs and trade policy in their workforce planning. Nearly 20% of respondents to a survey conducted by recruitment and staffing firm Hays in August reported delayed or reduced hiring due to tariff-related pressures, and 4% had shifted hiring to other regions, a sign that trade policy is influencing strategic business decisions in certain sectors.
An additional demographic headwind could limit available talent for years to come, Bachaud said. “As the U.S. population ages, immigration has been the saving grace that has kept the labor market afloat, especially given the higher labor force participation rate for foreign born workers,” she said. “But current immigration policy is reducing the foreign-born workforce, and without domestic replacement, supply will remain constrained.”
Layoffs Make Headlines
Layoff announcements seemed omnipresent in 2025, driven by corporate restructuring, AI adoption, and significant reductions in the federal government workforce spurred by the Trump administration.
U.S. employers announced 1.2 million layoffs last year, an increase of 58% from the previous year and the highest amount since 2020, according to outplacement services firm Challenger, Gray and Christmas. The federal government led all industries with planned layoffs, accounting for over 300,000, followed by technology firms with 154,445.
But separations data from the Bureau of Labor Statistics (BLS) —which compiles all terminations of employment — shows that while layoffs increased in 2025, they remain low by historic standards. There have been about 19.1 million total separations (layoffs and discharges) from January-November 2025, reflecting the latest data, compared with approximately 20.2 million total separations in 2024.
“It seems that overall, employers are fairly unwilling to let go of employees at a large scale,” Ladner said. “It is still costly to hire new workers. But layoffs are getting attention in industries like technology.”
Ladner added that some recent layoffs have been attributed to displacement stemming from the adoption of automation and AI and the reorganization that goes along with that. “I’m not sure that is true, but it raises the question going forward,” he said.
Unemployment should stabilize in 2026, hovering around the mid-4% range throughout the year, Bachaud said. “As hiring slowly picks up we will see some relief for unemployment,” she said.
Ladner explained that one byproduct of slowed-down hiring is that more people are entering the labor market and having trouble finding jobs, increasing the unemployment rate.
“It would not be surprising to see unemployment slowly tick up in 2026 due to job growth not keeping up with labor force growth,” he said.
Another pressing challenge is long-term unemployment. “Once someone becomes unemployed the difficulty of finding their next job is continuing to be a prolonged process,” Bachaud said. “The quits rate is also near historic lows,” she said. “Workers with jobs are clinging very tightly to those jobs. Staying with a steady paycheck is the winning strategy for most workers at this point.”
Government Data Comes Under Scrutiny
The 43-day federal government shutdown, unusually large revisions to monthly employment data, and the drama around President Donald Trump’s firing of the BLS commissioner in August led many to question the labor market information from the government. But while some concede that the monthly BLS employment report has flaws, it remains the standard by which the markets and the Federal Reserve act.
“In 2025, private businesses, policymakers, and individuals voiced many complaints about the quality and timeliness of official U.S. government data,” said Elizabeth Crofoot, principal economist at Lightcast. “But when the government shutdown temporarily stopped producing key datasets, its absence was immediately felt.”
She added that public data isn’t perfect, but it is provided as a public good, objective, wide in breadth, and meant to provide both short-term signal and historical context for identifying structural changes in the broader economy.
“There is no one source of truth when it comes to labor market data — outside of the BLS,” Bachaud said. “I don’t think that there is another source that will provide the level of information and depth of detail that the BLS data gives us. The BLS should respond with updates to their data collection methodologies to keep up with how work is changing. But is there any other place to look? Not really.”
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