The U.S. labor market is at a critical inflection point. The longest federal government shutdown in history and rising policy uncertainty are compounding the problem. A look at recent data tells a mixed story for job seekers. The jobs numbers for October and November were directly impacted by these catastrophes. In December, announced job cuts hit a 17-month low, per Challenger, Gray & Christmas. That might be a sign that the balance of power is tipping in the labor market.
As seen in the immediate aftermath of President Donald Trump’s tariff announcement in April 2025, this news has upended hiring plans in the manufacturing, service, and other sectors. In December, year-over-year payroll growth leapt to a significant 0.6%. That’s a welcome turnaround from the 0.2% uptick we experienced last month, internal data from Bank of America shows. Yet, even with this improvement, total employment growth is still dismally weak. That’s the slowest growth recorded this year, apart from historic pandemic-induced 2020 growth.
In December, employers reported intentions to lay off 35,553 workers. Hiring announcements increased to their highest level for the month since 2022. The consensus estimate expects about 55,000 jobs were created in December, which is consistent with the year-to-date job growth. Even with these advances, equitable access to the labor market is still an “exclusive club.” People can spend months or even years attempting to secure a position.
That would mean a modest drop in Washington’s unemployment rate to 4.5%, down from a four-year high of 4.6% in November. Relatedly, the quit rate of employees quitting their jobs—which can indicate confidence in the labor market—continued to be low across November. This relative stability provides a hopeful sign that though the labor market is indeed going through some challenges, it’s not completely dead in the water.
From January 2025 to November 2025, the healthcare sector and the leisure and hospitality industries were primary forces in job growth. Combined, they were responsible for a stunning 84% of all job growth in that timeframe. Together, these two sectors account for nearly a quarter of all U.S. employment. As noted by Nela Richardson, chief economist at payroll company ADP:
“Health services is an expensive type of service for most consumers; leisure and hospitality [spending] is a discretionary service for all consumers.”
This one observation speaks to the power of spending patterns to drive employment trends in these key areas. Richardson explains that these sectors reflect a broader economic trend:
“These two sectors are consistent with a K-shaped economy where higher-income consumers are driving spending.”
This disparacy points to a recovery very much divided along racial lines. For every industry booming with innovation and productivity, another is crushed by the burden of financial insecurity.
That’s because the labor market is still in what David Michael Tinsley, senior economist at Bank of America Institute, describes as a “low-hire or low-fire mode.” He says there are encouraging signs to suggest that the worst of the slowdown is behind us. He cautions:
“The true, underlying momentum for job growth is likely much softer and has been much softer for some time now.”
Despite some optimistic indicators, economic uncertainties stemming from sweeping policies and fluctuating immigration flows have resulted in muted employment gains across most industries. For the job seekers, they are looking at an ever more competitive marketplace. In fact, 2025 is on pace to be one of the worst hiring years, excluding recession years, since 2003.
Oren Klachkin, a financial market economist at Nationwide, emphasizes the lingering effects of the government shutdown on employment data:
“It’s not super-certain that we’ll be absolutely past all of the shutdown impacts, so we’ll have to wait and see what the numbers look like.”
He further adds that December’s job numbers could offer more clarity regarding economic conditions:
“But I’d say the December jobs numbers in general should give us a lot better sense as to what’s happening in the economy than we had in the November data.”
Employers are walking a tightrope in a volatile U.S. job market. Though a climate of slow growth continues to prevail, the fruitful regrowth from our recession is sprouting in many forms. Long, the chief economist at Navy Federal Credit Union, is now forecasting net new job growth for all of 2025 to be a paltry 710,000. It poses three key questions to stakeholders: Are December’s figures the start of a more robust recovery, or merely a fluke in an otherwise weak economy?