“We’re Hiring” sign at Cookout Fast Food Restaurant in Durham, North Carolina, November 25, 2025.
Al Drago | Getty Images
The US labor market showed perhaps modest improvement in December, providing some encouragement for the year ahead, but not much to get excited about.
Nonfarm payrolls are likely to increase by 73,000 people last month, and the unemployment rate has fallen slightly to 4.5%, according to the Dow Jones Consensus. The Bureau of Labor Statistics will release the report at 8:30 a.m. ET on Friday.
If these numbers are approximately accurate, that would be a slight increase from the average monthly increase of 55,000 cases in the 11 months to 2025, and a slight improvement over the 64,000 cases originally reported in November. The unemployment rate is up 0.5 percentage points since the beginning of last year.
Looking ahead to 2026, most economists see the labor market as far from great, but at least stable.
“This year is ending stronger than it started,” said Amy Glaser, senior vice president of business operations at Adecco Staffing. “We’ve seen some bright spots on the employment side and (a) slowdown in layoffs. So (the market) has a pretty positive outlook going into 2026. I think it’s going to be a year of stability.”
The labor market remained in a narrow range through most of 2025, from an increase of 158,000 jobs in April to a decline of 105,000 jobs in October. It has had a net loss in three of the past six months.
“Not too cold, not too hot, right in the middle,” Glaser said. “I think it will continue to be that way in 2026 because people are cautiously optimistic. There will probably be ups and downs and some bumps along the way. It may not be linear, but at the end of the day, I think the market has proven to be resilient.”
While surface signs in the labor market show that unemployment is historically very low, some Fed policymakers worry that cracks are appearing and could become more pronounced this year.
Policymakers who supported the latest three consecutive interest rate cuts cited the need to strengthen the employment outlook over concerns about a resurgence in inflation. Fed officials also cited “systematic overcounting” of payroll growth as a reason for caution.
Jose Torres, senior economist at Interactive Brokers, said there is growing expectation in the market that the Fed will intervene again if necessary.
“Confidence is rising due to expectations that the Fed will further ease monetary policy this year,” he said. “This will really drive employment in more cyclical areas.”
So far, job growth has been largely concentrated in sectors that benefit from expansionary fiscal policy, such as health care and government. Glaser expects this trend to continue.
Beyond this pattern, Glaser said another trend that will continue to be noted in 2026 is companies’ efforts to retain the staff they do have, rather than layoffs or aggressive hiring.
“Employers really value the people who join them and offer them salary increases, additional bonuses and perks,” she says. “One of the things that employers who are doing it right are just investing in upskilling and reskilling.”
Friday’s release marks the first scheduled report since the end of the government shutdown in mid-November. Questions have arisen over data gaps caused by the government shutdown, with some economists expecting the first “clean” report to be released in February.
