Americans looking for work in 2025 face a challenging environment. And 2026 might not be much better.
As of September, the most recent month for which we have official data, the unemployment rate stood at 4.4%, low by historical standards but the highest since October 2021. As of November, most consumers expected unemployment to rise next year, University of Michigan data showed.
Job growth has also been modest, while layoffs have picked up. Enrollment rates remain at lows seen early in the pandemic and after the Great Recession.
“It’s not a question of whether the market will melt — it’s whether it will crack,” noted a report last month by Indeed Hiring Lab on the recently frozen labor picture.
For example, healthcare represented 47.5% of all job growth recorded through August through 2025. A serious pullback in that sector alone, without improvement in others, could put further pressure on the job market.
“The most likely outcome is not a dramatic break from the current situation, but an extension of today’s ‘low-rent, low-fire’ environment where both employers and job seekers face a slower, more selective market,” said experts at Indeed Hiring Lab.
Read more: Worried about job security? Take these 5 steps now to protect your finances.
The November jobs report is scheduled for release on December 16, and December data is on deck for January 9, 2026, as the government works through a data backlog resulting from the 43-day government shutdown that ended last month.
Officials forecast unemployment to peak at 4.5% this year and fall to 4.4% by the end of 2026, according to a forecast published by the Federal Reserve this week. On Wednesday, Fed Chairman Jerome Powell noted that the job market is “under pressure,” while “job creation may actually be negative.”
“Now, the supply of workers has also gone down, so the unemployment rate hasn’t gone up as much,” Powell said. “But, you know, it’s a labor market that has significant downside risks. People care a lot about that.”
Federal Reserve Chairman Jerome Powell speaks at the Federal Reserve on December 10, 2025 in Washington, DC (AP Photo/Jacqueline Martin) ·The Associated Press
A low-wage, under-fire labor market, which has been tough for job seekers, looks likely to continue.
“It’s a concern to me that we’re starting a weaker year than last year,” said Alice Gould, senior economist at the Economic Policy Institute. “Do I think a recession is inevitable? I don’t know, but I think I have concerns — and it’s important to remember that even mild recessions can hit historically disadvantaged groups the hardest.”
Conditions have been particularly difficult for young Americans entering the job market.
The National Association of Colleges and Employers, in a survey of 183 employers conducted between Aug. 7 and Sept. 22, found that more than half of respondents rated the market for 2026 college graduates as poor or fair, which they felt was the depth of the pandemic.
Read more: How AI, unemployment, and interest rates could shape the stock market and your investments next year
When it came to job prospects for the class of 2026, most employers said they planned to maintain their current headcount — a continuation of conditions that dogged young job seekers who filled out hundreds of applications this year and heard nothing.
Companies are “seeing a 1.6% projected increase in hiring for the class of 2026,” said Mary Gatta, NACE director of research and public policy, “which means it’s basically flat compared to last year’s class.”
College students looking to stay competitive should try to hone their skills, land internships, and find on-campus jobs, Gatta said. AI know-how could be particularly valuable, although 14% of employers in NACE’s survey said they were already discussing replacing entry-level workers with the technology.
“In our survey, what we really saw is that people are not talking about replacing jobs, but rather increasing them,” Gatta said.
Cal State LA students graduate during their commencement ceremony on May 21, 2025 at the Shrine Auditorium in Los Angeles. More than 5,500 students graduated at the college during several commencement ceremonies. (Sarah Reiningwirtz/MediaNews Group/Los Angeles Daily News via Getty Images) ·MediaNews Group / Los Angeles Daily News via Getty Images via Getty Images
Still, Aysegul Sahin, a professor of economics and public affairs at Princeton University, said that while current sentiment about the labor market is negative, fewer jobs may be needed amid lower immigration, which keeps the unemployment rate steady.
“There’s a bit of disagreement as to whether what we’re seeing is the beginning of a recession or a type of mature expansion phase with slower population growth due to immigration restrictions,” Sahin said. “I’m on the second side, because I believe what we’re seeing is the delayed effect of a soft landing that the Fed has almost completely completed.”
In comments written on Yahoo Finance, KPMG US Senior Economist Matt Nestler also noted: “An aging population and restrictive immigration policies are weighing on the labor supply. The result is a very low number of payrolls each month (ie, the number needed to keep the unemployment rate unchanged). Expect a monthly low-wage report benefit.”
Emma Aukerman is a reporter covering the economy and labor for Yahoo Finance. You can reach him emma.ockerman@yahooinc.com.
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