U.S. job growth slows to post-pandemic low even as layoffs remain near record lows

The U.S. labor market is slowing to its weakest pace of job creation since the pandemic recovery — but without the wave of layoffs that usually signals a downturn.

Employers added 50,000 jobs in December, the Labor Department reported Jan. 9, capping a year in which payrolls grew by just 584,000. That is down sharply from 2 million jobs added in 2024 and marks the softest nonrecession year for job growth in roughly two decades.

At the same time, new applications for unemployment benefits remain near historic lows. Initial claims for jobless aid were 209,000 in the week ending Jan. 24, the Labor Department said Jan. 29. The number of people receiving continuing benefits fell to 1.83 million, the lowest since September 2024.

The result is an unusual “low-hire, low-fire” labor market in which workers who already have jobs are rarely being let go, but the door into new work — or into better-paying roles — has become harder to push open.

“Total nonfarm payroll employment changed little in December,” the Bureau of Labor Statistics said in its monthly report, noting the 50,000 gain. “Payroll employment rose by 584,000 in 2025 … less than the increase of 2.0 million in 2024.”

Economists say that combination of meager hiring and muted layoffs is reshaping how both workers and policymakers view the economy.

“There are now more unemployed job seekers than job openings,” said a recent analysis by KPMG of federal job openings data. “That speaks to how frozen the labor market has become, as those who have a job stay put and those without are locked out.”

A cooler labor market behind steady headline numbers

The unemployment rate edged down slightly to 4.4% in December from 4.5% in November, but remains above levels seen during the immediate post-pandemic boom. It stood closer to 4% at the start of 2024.

Other gauges point to a labor market that has lost momentum over the past year. Job openings fell to about 7.1 million in November, down nearly 900,000 from a year earlier and near a four-year low. For the first time since 2021, there are more unemployed people than advertised jobs.

The Labor Department’s Job Openings and Labor Turnover Survey shows hiring at 5.1 million in November, roughly matched by 5.1 million separations. Layoffs and discharges, at 1.7 million, were little changed from a year earlier and at a six-month low. The quits rate — the share of workers voluntarily leaving their jobs, often to take better offers — has slipped to 2%, well below the highs of 2021 and 2022.

On the surface, the claims data suggest stability. Historically, weekly initial claims of 200,000 to 220,000 have been associated with strong labor markets. The insured unemployment rate, which tracks the share of workers collecting benefits, stood at 1.2% in mid-January, a very low figure by pre-pandemic standards.

“In the week ending January 24, the advance figure for seasonally adjusted initial claims was 209,000,” the Labor Department said in its weekly report. The number of people continuing to receive benefits fell by 38,000 from the prior week.

But beneath those steady flows, more Americans are struggling to find enough work.

The number of people unemployed for 27 weeks or longer rose over the past year to about 1.9 million in December, an increase of 397,000. Long-term unemployed workers now account for roughly 26% of all jobless Americans.

The number working part time for economic reasons — those who would prefer full-time hours but cannot get them — climbed to about 5.3 million, up nearly 1 million over the year. An estimated 6.2 million people wanted a job but were not actively looking, leaving them outside the official labor force.

Taken together, a broader measure of labor underutilization that includes these groups, often called the U-6 rate, was around 8.4% in December, higher than a year earlier.

“The stalling labor market eroded workers’ bargaining power, leaving them in a weaker financial position going into 2026,” the Center for American Progress, a left-leaning policy institute, said in a recent assessment of the December data.

Wages holding up, but hours and leverage slip

Average hourly earnings for private-sector workers rose 0.3% in December to $37.02, up 3.8% over the past year. That outpaces recent inflation readings — the Federal Reserve’s preferred personal consumption expenditures price index has been rising at roughly a 2.5% to 3% annual rate — suggesting modest real wage gains.

Yet the average workweek shortened to 34.2 hours in December. In manufacturing, the workweek fell to 39.9 hours, and overtime slipped as well.

Shorter hours and more involuntary part-time work mean that weekly paychecks are not rising as quickly as hourly wage figures suggest, especially for workers in industries facing softer demand.

Job prospects also vary sharply by industry.

Health care and social assistance continued to add staff in December, with payrolls rising by a combined 38,000. Over the full year, those two sectors accounted for the overwhelming share of private-sector job growth, adding roughly 700,000 positions.

Restaurants and bars added 27,000 jobs in December and posted steady but moderate gains throughout 2025.

By contrast, retailers cut 25,000 jobs in December, led by losses at warehouse clubs, supercenters and grocery stores. Manufacturing employment slipped by about 8,000 in December and fell by around 68,000 over the course of 2025, amid weaker global demand and ongoing shifts in supply chains.

Construction employment was essentially flat for the year and showed a small decline in December, as higher borrowing costs and labor shortages weighed on new projects.

The federal government was a significant drag on overall job growth. Federal employment has dropped by roughly 277,000 since January 2025 — a decline of more than 9% — after program cuts, a lengthy government shutdown in the fall and a wave of voluntary departures under an early-resignation program.

Those reductions contributed to a 173,000 drop in total payrolls in October, later revised down from an initially reported decline. The Bureau of Labor Statistics also noted that the 43-day shutdown disrupted its household survey, making some 2025 data less directly comparable with previous years.

Fed steps back to “wait and see”

The shifting labor landscape is central to the Federal Reserve’s decisions on interest rates.

After holding its benchmark rate at a two-decade high for much of 2024, the Fed cut the federal funds target range three times in 2025 — in September, October and December — bringing it down to 3.50% to 3.75%.

“Job gains have slowed this year, and the unemployment rate has edged up through September,” the Federal Open Market Committee said in its Dec. 10 statement, as it announced the third quarter-point cut. The committee said it was lowering rates “in light of the shift in the balance of risks,” pointing to increased downside risk to employment.

At its Jan. 27–28 meeting, the Fed left rates unchanged, signaling a pause after the rapid easing. Chair Jerome Powell told reporters the policy rate was now “within a broad range of estimates of neutral,” the level that neither stimulates nor restrains growth.

Policymakers indicated they are “well positioned to wait and see how the economy evolves,” while maintaining that their next move is more likely to be another cut than a hike, barring an unexpected flare-up in inflation.

Fed projections released in December envisioned economic growth of a little more than 2% in 2026, with the unemployment rate holding in the mid-4% range and only one or two additional cuts over the year.

Low jobless claims give the central bank some room to be patient, because they suggest no immediate recession threat. But the steady rise in long-term unemployment and underemployment raises questions about how long the current equilibrium can last without broader damage to workers’ finances.

Structural shifts and the 2026 outlook

Several longer-running forces are shaping the “low-hire, low-fire” pattern.

U.S. population growth slowed to 0.4% between mid-2024 and mid-2025, one of the weakest non-pandemic increases on record, as net immigration declined. With fewer new workers entering the labor force, employers do not need to add as many jobs each month to keep the unemployment rate steady, even as slower population growth also constrains the economy’s potential.

Businesses have also invested heavily in automation and artificial intelligence, allowing them to expand output without proportionate increases in staffing, particularly in larger firms and white-collar occupations.

Tariffs and trade tensions, combined with stricter immigration enforcement and a shrinking federal workforce, have added to uncertainty in manufacturing, logistics and government-heavy regions.

The impact of the slowdown is uneven. Black workers face an unemployment rate of about 7.5%, roughly double the 3.8% rate for white workers. Younger and lower-wage workers are more likely to be stuck in part-time jobs when they want full-time hours, or to be among the long-term unemployed.

For now, the United States has avoided the mass layoffs that usually mark the onset of recession. For many households, jobs feel more secure than they did during previous downturns.

But with hiring weak, openings scarce and wage gains only modestly ahead of inflation, mobility and bargaining power are waning.

As 2026 begins, the central question is whether this frozen labor market will thaw — with stronger hiring and more opportunities for workers to move up — or harden into a new normal of low growth, low layoffs and limited chance for advancement.