U.S. labor market is facing a growth freeze, with hiring and layoffs at their worst levels since the COVID-19

The U.S. Labor Market experienced record low growth in 2025. The number of layoffs last year was on par with those during the height of the 2020 COVID-19 Pandemic, and the number of unemployed Americans has outpaced job openings for the first time since 2021.

The latest U.S. Labor Market data paints a rather bleak picture for those seeking employment in 2026. The U.S. Bureau of Labor Statistics (BLS) reported that U.S. employers added roughly 580,000 jobs in 2025, a drastic decrease compared to the 2 million jobs that were added in 2024. This marks the lowest number of jobs added to the U.S. labor market since the Pandemic.

As of December 2025, the unemployment rate is sitting at around 4.4%, with around 7.5 million people currently facing joblessness. However, this number doesn’t quite accurately assess the gravity of the current labor market situation. The BLS also reports that the number of people who are “not in the labor force who currently want a job” is around 6.2 million as of December 2025. The reason these individuals were not classified as unemployed is because “they were not actively looking for work during the 4 weeks preceding the survey or were unable to take a job.”

The number of people who have been unable to find full-time work and are thus forced to work part-time jobs for economic reasons is 5.3 million. This number has grown by nearly 1 million (980,000) over the last year. As a whole, this data shows a perilous job market where there is a growing number of people looking for full-time employment, yet there simply aren’t enough job opportunities available. The amount of time it takes to find a job in the first place has increased substantially as well. Additional data by the BLS shows that a quarter of people who are currently unemployed have been out of work for over 6 months. This statistic is also on par with Pandemic levels.

Why the labor market is so bad right now

The U.S. job market is currently experiencing a growth freeze, and there are a number of reasons why. At the top of the list are inflation and economic pressures. Growth Shuttle reports that rising prices in the United States is not only extremely difficult for consumers to grapple with, but it also impacts businesses as well. The unfortunate result is that a growing number of layoffs have ensued as an attempt by corporations to maintain profit margins amid rising economic instability. Certain companies that rely on international imports as a part of their business model have been greatly impacted by increased tariffs as well, which has also resulted in hiring freezes and increased layoffs.

The rise of artificial intelligence in 2025 has also contributed to this tumultuous job market. In an effort to adapt to the changing economic landscape amid tariffs and inflation, many companies have shifted towards automation to increase their profit margins. Advancements in AI have allowed many companies to reduce human capital in entry-level positions like customer service and manufacturing by investing in AI products and services. This is particularly the case in the technology industry and marks a concerning shift in corporate policy for those seeking employment in 2026. Entry-level positions may become increasingly unavailable due to the utilization of artificial intelligence by employers.

The last factor contributing to the hiring freeze is that people who have not been impacted by layoffs or AI replacement are highly reluctant to quit their current positions. This is obviously a very understandable position for employees to take, considering the grim and uncertain state of the job market right now.

The future of the job market in 2026 and beyond

JP Morgan published a report in December of 2025 that depicted a rather mixed outlook on what to expect for the future of the job market in 2026. On one hand, contrary to what some believe, the report does not showcase any concerns over large-scale job displacement due to artificial intelligence. Still, it does predict that the first half of the year will largely be an echo of 2025, anticipating continued slow growth in the labor market.

The Society for Human Resource Management (SHRM), reports that it will take some time for the labor market to return to an increase in hiring activity, predicting a slow year for job growth in 2026. Although SHRM expects unemployment will stabilize later this year, people entering the labor market will still struggle with finding full-time work. Contrary to JP Morgan, SHRM anticipates that entry-level positions will continue to be highly impacted by AI displacement in 2026, while the healthcare industry will continue to have ample employment opportunities. Additional labor market data is set to be released by the BLS in early February of this year.

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