A “Now Hiring” sign is seen at an AutoZone in Hollywood, Florida on February 11, 2026.
Joe Radle | Getty Images
The labor market in 2025 has been widely described as “unstable,” with virtually no job growth and significant headwinds expected. But in 2026, things will look more or less the same, and the buzzword seems to be “stable.”
Employment is low and layoffs remain low, with companies reluctant to lay off workers as demand remains strong, but also reluctant to add employees due to uncertainties surrounding tariffs, inflation and geopolitics.
But characterizations from Federal Reserve officials and market economists have become at least a little more optimistic, emphasizing the stability, if not the robustness, of the labor market.
What’s the difference between this year and last year? Expectations.
With immigration crackdowns and other factors holding back labor force growth, the general belief is that, at least for now, it’s OK to keep the employment rate subdued, and that the current pace of job growth is appropriate and even expected.
“We’re actually seeing some signs of some stabilization in the U.S. labor market,” Claudia Sahm, chief economist at New Century Advisors, said in a recent CNBC interview. Mr Sahm, author of the oft-cited ‘Sahm Rule’ which uses changes in the unemployment rate to predict recessions, added that we need to be ‘very careful’ because ‘the fact that the employment rate is so low makes us vulnerable’.
“There has actually been some good news this year in the labor market, but we need to see the employment rate recover,” she added. “It was a bit of a mystery how low employment was given the fact that the U.S. economy is expanding.”
Further clues about where the employment situation is heading will come Friday at 8:30 a.m. ET when the Bureau of Labor Statistics is scheduled to release its monthly report on nonfarm payrolls for February.
Economists polled by Dow Jones expect payrolls to grow by 50,000, following January’s astonishing high of 130,000. The unemployment rate is expected to remain at 4.3%, another sign that a stable labor market is not in a state of gang violence, but is strong enough to keep it stable.
How stable is it?
However, so-called stability may not be everything.
Most of the salary increases in 2025 came from healthcare-related industries. Without this sector, even last year’s average monthly profits of just 15,000 would have evaporated. And this year’s environment looks much the same to people on the ground.
“One of the things that’s really interesting, and potentially problematic, is that almost all of the growth is happening in the health and social (aid) sectors,” said Laura Ulrich, director of economic research at Indeed. “If you’re seeing this much growth in just one subsector, I don’t think it’s balanced or stable.”
For January, these two sectors accounted for virtually all the increase, with health care adding 82,000 cases and social assistance adding 42,000 cases. By contrast, the construction industry fell by 88,000 jobs in 2025, despite President Donald Trump’s tariffs aimed at stimulating the industry.
Technology-related sectors are also under pressure as the adoption of artificial intelligence accelerates. block Co-founder and CEO Jack Dorsey shocked the labor market last week by announcing that the company would cut employee costs by about 40% in response to AI pressures.
For February in particular, the BLS report could be weighed down by the resolved strike at Kaiser Permanente, affecting 31,000 workers in California and Hawaii and potentially hurting health care workforce numbers. The impasse ended on February 23, but the strike occurred during the survey week that the BLS uses to prepare its reports.
Bank of America expects payrolls to rise by 35,000 jobs, lower than consensus, due to the strike, but says the unemployment rate may not be affected.
