Is It a Hiring Freeze Nation?
The final jobs report of 2025 highlights a challenging U.S. labor market. Hiring momentum slowed significantly this year, raising an important question: Are we entering a period of widespread hiring freezes?
In December, only 50,000 new jobs were added, well below the forecasted 73,000 and the 2024 monthly average of 168,000. This marks the weakest year of job growth since the post-2020 recession recovery. Although the unemployment rate declined to 4.4 percent, this masks fundamental problems. Long-term unemployment is increasing; job-finding expectations are at historic lows, and employers are managing labor costs through hiring freezes rather than layoffs.
A Year Defined by Slowing Momentum
The larger picture indicates a slowing labor market. In 2025, employers added 584,000 jobs, averaging 49,000 per month. This represents a 71 percent decline from last year and less than one-third of the jobs created in 2024. Downward revisions to October and November reduced the year's total by an additional 76,000 jobs.
These trends indicate that employers are reducing hiring and reassessing workforce strategies in response to uncertainty, rising costs, and industry changes.
Employers Lean on Hiring Freezes, Not Layoffs
The Federal Reserve’s Beige Book provides important insights. Business contacts in several Fed districts report that companies are avoiding large layoffs. Instead, they are using hiring freezes, replacement-only hiring, and attrition to manage their workforce.
This wait-and-see method shows a reluctance to commit to long-term workforce expansion. Employers remain cautious, maintaining steady headcounts while preparing for uncertain demand and costs.
Industries Moving in Opposite Directions
The 2025 labor market is characterized by a notable imbalance. A few sectors are driving most job growth, while the majority are stagnating or contracting.
Healthcare and leisure/hospitality lead hiring. In December, healthcare added 38,500 jobs, including 16,000 in hospitals. Leisure and hospitality gained 27,000 jobs.
Outside these sectors, job growth is minimal. Retail trade lost 25,000 jobs in December, affecting holiday-season expectations. Manufacturing remained largely unchanged, indicating ongoing weakness. The federal government has reduced its workforce by 277,000 since January due to policy changes and budget constraints.
Job creation is concentrated in healthcare and hospitality, which represent only 22 percent of U.S. employment but accounted for 84 percent of job gains through November 2025.
Warning Signs Inside the Household Survey
Despite declining unemployment, underlying challenges persist. The number of long-term unemployed reached 1.9 million, representing 26 percent of all unemployed. Involuntary part-time workers increased to 5.3 million, nearly one million more than last year. Job-finding confidence is at a historic low.
Is This Our New Normal?
Current evidence suggests that the labor market is in a delicate, transitional phase rather than a crisis. Employers are reluctant to reduce or significantly expand their workforce. Wage growth has slowed, hours worked have declined, and AI adoption is beginning to reduce demand for some entry-level positions.
Collectively, these signals point to a strategic pause in the labor market rather than a collapse. While current data does not confirm a full hiring freeze, the U.S. is moving in that direction. The outlook for 2026 will depend on inflation, consumer demand, tariff policy, and the pace of automation.
Get latest Jobs Report:
Sources:
- U.S. Bureau of Labor Statistics
- Bloomberg
- CNBC
- Cable News Network
- Federal Reserve Beige Book
- LinkedIn Hiring Lab
Past Reports
