U.S. Labor Market Freezes: Hiring & Layoffs Hit Worst Levels Since COVID-19
American job growth just slammed into a wall.
Hiring's frozen. Layoffs are climbing. The numbers don't lie—we're seeing the most dismal employment figures since the pandemic's peak disruption. Forget a soft landing; this looks like the economy is stalling on the tarmac.
The Data Tells the Story
You don't need a fancy economics degree to read this chart. Key metrics across the board are flashing red, mirroring—and in some cases surpassing—the bleakest moments from the COVID-era collapse. It's a complete reversal from the 'hiring frenzy' narrative of just a few quarters ago.
What's Behind the Chill?
Companies are battening down the hatches. Uncertainty is the new CEO. With forecasts turning gloomy, the easy money's gone, and corporate boards are mandating cuts. It's a classic defensive pivot: preserve capital, trim headcount, and hope to outlast the downturn. The era of growth-at-all-costs is officially on ice.
A Finance Pro's Cynical Take
Let's be real—Wall Street analysts will spin this as a 'necessary cooling' to tame inflation, a sign the Fed's policies are 'working.' It's the oldest trick in the book: reframe human economic pain as a positive macroeconomic indicator. Meanwhile, your average trader is just looking for the next asset class to pump.
Bottom line: The jobs engine has sputtered. Whether this is a brief pause or the start of something deeper remains the trillion-dollar question. One thing's clear—the easy ride is over.
Why the labor market is so bad right now
The U.S. job market is currently experiencing a growth freeze, and there are a number of reasons why. At the top of the list are inflation and economic pressures. Growth Shuttle reports that rising prices in the United States is not only extremely difficult for consumers to grapple with, but it also impacts businesses as well. The unfortunate result is that a growing number of layoffs have ensued as an attempt by corporations to maintain profit margins amid rising economic instability. Certain companies that rely on international imports as a part of their business model have been greatly impacted by increased tariffs as well, which has also resulted in hiring freezes and increased layoffs.
The rise of artificial intelligence in 2025 has also contributed to this tumultuous job market. In an effort to adapt to the changing economic landscape amid tariffs and inflation, many companies have shifted towards automation to increase their profit margins. Advancements in AI have allowed many companies to reduce human capital in entry-level positions like customer service and manufacturing by investing in AI products and services. This is particularly the case in the technology industry and marks a concerning shift in corporate policy for those seeking employment in 2026. Entry-level positions may become increasingly unavailable due to the utilization of artificial intelligence by employers.
The last factor contributing to the hiring freeze is that people who have not been impacted by layoffs or AI replacement are highly reluctant to quit their current positions. This is obviously a very understandable position for employees to take, considering the grim and uncertain state of the job market right now.
The future of the job market in 2026 and beyond
JP Morgan published a report in December of 2025 that depicted a rather mixed outlook on what to expect for the future of the job market in 2026. On one hand, contrary to what some believe, the report does not showcase any concerns over large-scale job displacement due to artificial intelligence. Still, it does predict that the first half of the year will largely be an echo of 2025, anticipating continued slow growth in the labor market.
The Society for Human Resource Management (SHRM), reports that it will take some time for the labor market to return to an increase in hiring activity, predicting a slow year for job growth in 2026. Although SHRM expects unemployment will stabilize later this year, people entering the labor market will still struggle with finding full-time work. Contrary to JP Morgan, SHRM anticipates that entry-level positions will continue to be highly impacted by AI displacement in 2026, while the healthcare industry will continue to have ample employment opportunities. Additional labor market data is set to be released by the BLS in early February of this year.
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