The U.S. Labor Market: Late 2024 to Early 2026
A consolidated, neutral summary of official data and private sector reports, covering periods of slow growth, data revisions, and significant shifts in hiring, quits, and layoffs.
Late 2024: Slowdown and Moderation
Data from the Bureau of Labor Statistics (BLS) and other sources for the final months of 2024 indicated a softening labor market.
Job Openings Decline Sharply
The number of estimated job openings fell to 7.15 million in November, down from 7.45 million in October. By December, openings decreased further to 6.54 million, the lowest level since September 2020.
Hiring Activity Weakens
New hires totaled 5.12 million in November, a decrease from 5.37 million in October, marking the lowest level since June 2024. The hiring rate returned to 3.2%, a rate not seen in over a decade excluding the pandemic period.
December Job Growth Misses Expectations
The BLS reported that nonfarm payrolls increased by 50,000 in December, below the Dow Jones estimate of 73,000. Revisions to prior months showed November's gain revised down by 8,000 and October's loss adjusted to 173,000 from 105,000.
Unemployment Dips, Broader Measure Declines
The unemployment rate decreased to 4.4% in December from 4.5% in November. A broader measure of unemployment (U-6) declined to 8.4%.
Sector Performance: Mixed Results
Job growth in December was led by restaurants and bars (+27,000) and health care (+21,000). The retail sector declined by 25,000 jobs. For the full year, payroll gains averaged 49,000 per month, down from 168,000 in 2024.
Quits and Layoffs: Contrasting Trends
The number of voluntary quits increased in November. Announced layoffs in December reached a 17-month low of 35,553, according to Challenger, Gray & Christmas, representing a 50% decrease from November. However, for the full year, announced job cuts exceeded 1.2 million, the highest since 2020.
Private Sector (ADP)
ADP reported that private-sector employers added 41,000 jobs in December, following a net loss of 29,000 in November. Job gains were concentrated in health care and education (+39,000) and leisure and hospitality (+24,000).
Early 2025: Weaker Growth and Annual Revisions
The start of 2025 was characterized by subdued job growth, and an annual benchmark revision by the BLS showed that hiring in 2024 was weaker than initially estimated.
January 2025: Payrolls Beat Expectations
The BLS initially reported an addition of 130,000 jobs in January, exceeding economists' expectations for a smaller gain. The unemployment rate decreased to 4.3%.
Annual Benchmark Revision: 900,000 Fewer Jobs
The BLS's annual revision, which incorporates more accurate data from unemployment tax records, indicated that there were approximately 900,000 fewer jobs in the economy by March 2025 than previously reported.
February 2025: Unexpected Job Loss
The U.S. experienced an unexpected loss of 92,000 jobs in February. The national unemployment rate rose to 4.4%.
March 2025: Rebound Exceeds Forecasts
The BLS reported that the U.S. added 178,000 jobs in March, exceeding economists' forecasts. The unemployment rate decreased to 4.3%.
Revisions Worsen Early 2025 Picture
The payroll estimate for January was revised upward from 126,000 to 160,000. The estimate for February was revised downward from a loss of 92,000 to a loss of 133,000. The net effect of these revisions is that total employment for January and February was 7,000 lower than previously reported.
Sector Data (March 2025)
Health care added 76,000 jobs, with about half attributed to workers returning after a strike. Construction added 26,000 jobs. The federal government reduced its workforce by 18,000 positions.
Wage Growth Slows
Average hourly earnings rose 0.3% in March and were up 3.5% from a year earlier, following a 3.8% year-over-year gain in February.
Labor Force Participation Dips
The labor force participation rate slightly decreased to 61.8%.
Key Indicators: Hiring, Quits, and Job Openings (Early 2025)
The hiring rate in February fell to 3.1% of the U.S. workforce, a level last seen in April 2020.
The "quits rate" fell to 1.9%, its lowest level since 2020, suggesting workers were less likely to leave their jobs voluntarily.
Job openings decreased in February but showed signs of stabilization.
Layoffs: Mixed Signals
For the first quarter, Challenger, Gray & Christmas reported 217,362 announced job cuts, the lowest total for that period since 2022. However, in a separate report for January 2026, layoffs totaled 108,435, the highest total for that month since 2009, citing contract loss and market conditions.
Economic Context and External Factors
Several factors were cited in reports as influencing the labor market during this period.
Inflation Trajectory
Consumer price inflation decreased to 2.3% in April 2025 before rising to 3% by September. From January 2026 onward, the rate of price increases held steady at 2.4%.
Geopolitical Events
Reports cited that an ongoing conflict in Iran has led to a sharp increase in energy prices, with U.S. average gasoline prices surpassing $4 per gallon.
Federal Reserve Policy
Following three rate cuts in late 2025, the Federal Reserve maintained its benchmark interest rate at several meetings in early 2026. Market expectations for further cuts were described as uncertain.
Workforce Demographics
Reports noted that a reduction in immigration and the retirement of baby boomers have contributed to a smaller overall workforce.