December employment data indicates a potential deceleration in job growth by the close of 2025

US Job Market Ends 2025 With Tepid Growth

The American labor market wrapped up 2025 with only slight gains in employment. However, the latest jobs report released on Friday does little to dispel mounting uncertainty about the economy’s direction. Questions remain about whether the nation is entering a period of stagnation—where hiring and firing both slow to a crawl—or if deeper weaknesses are emerging.

Data from the Bureau of Labor Statistics shows that employers added just 50,000 jobs in December, falling short of forecasts. Although the unemployment rate dipped slightly, broader indicators of labor slack worsened compared to 2024. Additionally, November’s employment numbers were revised downward, revealing even weaker job creation than previously thought.

At first glance, the headline figures indicate the economy is still generating jobs, though at a much slower rate. But a closer look reveals a growing list of troubling signals.

Retail Sector Suffers Significant Job Cuts

One of the most notable findings in the report was a steep loss of 25,000 jobs in the retail sector—a rare contraction, even after accounting for seasonal adjustments. This drop suggests that retailers may have scaled back hiring plans or are actively reducing staff, regardless of consumer demand.

The decline in retail employment points to a cautious approach among businesses, with a focus on protecting profit margins and streamlining operations rather than pursuing growth. This trend raises concerns about future consumer demand as 2026 approaches, especially since many households continue to grapple with high living costs and expensive borrowing.

According to the report, “Employment fell by 19,000 in warehouse clubs, supercenters, and other general merchandise stores, and by 9,000 in food and beverage outlets.”

Rising Underemployment and Persistent Long-Term Unemployment

Beyond the headline job numbers, other labor market indicators continued to deteriorate. December saw an increase in the number of people working part-time for economic reasons, pushing underemployment higher. Simultaneously, the share of long-term unemployed—those out of work for 27 weeks or more—grew, now representing a larger portion of the jobless population.

This troubling combination signals deeper issues. While large-scale layoffs have not materialized as in past recessions, companies are also not expanding their workforce or offering more full-time positions. Millions are seeking employment, but finding it increasingly difficult to secure stable, well-compensated jobs.

Job Growth Remains Uneven Across Industries

Another area of concern is the continued disparity in hiring between sectors. As seen in recent private reports, the BLS data shows that job gains are mostly limited to healthcare and social assistance—fields buoyed by steady demand and an aging population. In contrast, employment in professional and business services remains sluggish, echoing private data that highlights ongoing cutbacks in white-collar and capital-intensive industries.

Wage Growth Slows and Workweeks Shorten

Wages grew only modestly, indicating that workers have less leverage to negotiate higher pay. At the same time, the average length of the workweek declined slightly.

Labor Market Faces an Uncertain Path Forward

This latest report follows months of volatile and sometimes misleading labor data, complicated by last autumn’s government shutdown and repeated cautions from Federal Reserve Chair Jerome Powell that official payroll figures may overstate job creation. As a result, both investors and policymakers have increasingly turned to private data sources, most of which suggest that hiring is slowing beneath the surface.

Looking ahead, 2026 may prove to be a year in which the US job market searches for a new, more stable foundation.