The job market is showing signs of life
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Illustration: Aïda Amer/Axios
The final months of 2025 offered plenty of reasons for labor market alarmism. Job creation slowed to a near halt, the unemployment rate edged to its highest level in four years, and the business news wires were chockablock with AI-inflected layoff announcements.
- But the job market looks more stable than those headlines would suggest.
The big picture: Private-sector data for December points to some stabilization in demand for workers — and certainly suggests that labor demand isn't falling off any kind of cliff.
- Data further in the rearview mirror (government data for November) points to fewer job openings and less hiring, though the layoff rate also ticked down.
- In effect, the job market showed weakness through the fall before stabilizing and perhaps improving in December, pending the government's gold standard employment situation report this Friday.
By the numbers: Private employers added 41,000 jobs in December, payroll processor ADP said, a reversal from a loss of 29,000 positions in November.
- The Institute for Supply Management's index of activity at service businesses jumped 1.8 percentage point, to 54.4 in December — fueled by a big surge in the employment sub-index, which rose 3.1 points to enter positive territory for the first time in seven months.
- Bank of America's estimate of payrolls based on customer data rebounded to a 0.6% year-on-year gain in December, from 0.2% in November.
What they're saying: "The labor market seems to have found feet on the jobs growth side, and that's a positive to take away," David Tinsley, senior economist at the Bank of America Institute, told reporters Wednesday morning.
- He notes that there has been a dichotomy in recent quarters between strong GDP growth and weak job growth.
- "There was always this debate about how this could reconcile, and it doesn't feel quite right that those things could be out of whack forever," Tinsley said. "And it seems to be reconciling more on the upside to the labor market strength coming back."
Similarly, "we don't see a big uptick in layoffs," ADP chief economist Nela Richardson told reporters Wednesday morning.
- "I think that puts the Fed in a reasonably balanced risk position in 2026 where they're trying to figure out this muddled middle between sticky inflation and a slowing — but not tanking — labor market," Richardson added.
Of note: Hiring by small businesses rebounded a bit in December after a dismal stretch of job losses in the latter half of 2025. ADP reported a net gain of 9,000 jobs for firms with fewer than 50 employees last month, after shedding about 96,000 positions in November.
Notwithstanding the solid December private-sector data, the November Job Openings and Labor Turnover (JOLTS) numbers pointed to a low-hire, low-fire equilibrium persisting through the fall.
Zoom in: The number of posted job openings fell by 303,000 in November, the Labor Department said, bringing its rate down two ticks, to 4.3%, matching an August recent low.
- Hiring also fell, by 253,000 positions, similarly driving the hiring rate down to 3.2%, matching the August low for this expansion.
- The news was considerably better on layoffs and discharges, with the number falling by 163,000 and the rate by a tenth.
- "Employers are reluctant to make moves, as uncertainty around tariffs and inflation still linger," ZipRecruiter labor economist Nicole Bachaud wrote in a note, adding that "workers are staying put, with few opportunities emerging for job switching" and many choosing stability.
Between the lines: For all the talk of corporate head count reductions, companies — at least through November — were more in a mode of freezing hiring and reducing job openings than outright firing people.
- It amounts to a labor market that is holding up OK for those who have a job, but is brutal for those looking for a job.
The bottom line: The open question for 2026 is whether the green shoots evident in December private employment data presage a stabilization or an improvement in employers' willingness to hire more workers — and not just exercise caution in firing.
