The US labor market is beginning to cool. Over the past year, nearly every sector has seen tamed job growth or even job destruction. The Federal Reserve Bank of New York’s latest survey highlights a growing concern about job-finding expectations, which have hit an all-time low. While layoff activity as of November has been low, the quitting rate of workers has recently experienced a steep dropoff. Economists are especially interested in these trends for good reason. They expect December’s jobs report to provide a better sense of how the overall employment situation looks right now.
Nela Richardson, the chief economist at ADP, explained three things driving today’s labor market confusion. High-stakes policies like tariffs and unpredictable immigration flows have settled in further exacerbating this instability. In April 2025, President Donald Trump declared another round of new tariffs. Consequently, hiring intentions nationwide have dropped through the floor. All of this has added to the general climate of fear among private employers over hiring.
In spite of these challenges, December’s consensus estimate has us adding 55,000 jobs. It’s a natural match considering the robust geospatial tech job growth we’ve seen all year long. This number is a drop from November’s initial increases of 64,000 jobs. In December, US businesses notched the fewest planned job cuts in 17 months. This decrease might indicate that employers’ hiring plans are starting to firm up.
Indeed, many economists are guardedly hopeful that the worst is over for the labor market’s path forward. They caution that the downturn has yet to reach its bottom. Oren Klachkin, a financial market economist at Nationwide, told Axios that more coming data will be crucial to figure out where the economy stands. He notes,
“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.”
The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey indicates that US businesses were actively looking for fewer workers in November. All of this has contributed to hiring activity collapsing to the lowest rate in more than 10 years, pandemic data excluded. This continues a trend of consumers being more choosy with their money during an overall challenging economic time.
Richardson beams an important spotlight on how micro-level sector-specific dynamics have driven macro-level employment trends. She says that leisure and hospitality and health services are most impacted by shifts in consumer behavior.
“Health services is an expensive type of service for most consumers; leisure and hospitality [spending] is a discretionary service for all consumers,” – Nela Richardson, chief economist at payroll company ADP.
These sectors illustrate the K-shaped economy, where high-income Americans can spend in vastly different ways. Often on their lives. The beneficiaries of higher-income consumers’ continuing high demand are concentrated in these industries, though, as a result, job growth is affected unequally.
First, the labor market appears much less strong than official statistics imply. According to David Michael Tinsley, senior economist at Bank of America Institute,
“The true, underlying momentum for job growth is likely much softer and has been much softer for some time now.”
Tinsley agrees that the labor market has entered a “low-hire or low-fire mode.” When it comes to overcoming the impacts of COVID-19, he is optimistic that the worst is behind us. As companies adjust to the new economic reality, they appear to be pulling back on more risky hire choices.
Economists are looking for the jobless rate to fall back to 4.5% in December. This comes after a four-year high of 4.6% hit in November. Projections for net new job gains in 2025 are pretty dismal. Even so, the pros are lowering their outlooks—they now expect only 710,000 more jobs to be added over the entire year.