A cooling labor market, characterized by sluggish hiring and anemic job creation, made it hard for job seekers to find work in 2025, according to economists. The year was marked by a significant decline in job gains, with U.S. employers adding only 584,000 jobs, the worst year for total job gains outside of a recession since 2003.
Heather Long, chief economist at Navy Federal Credit Union, described 2025 as a “hiring recession” in the United States, affecting both blue- and white-collar workers. The recession was evident in the lack of job creation, with most gains taking place early in the year and little hiring occurring since April.
Most hiring has been concentrated in the health-care sector, making it difficult for workers to participate across the broad labor market, economists said. Nicole Bachaud, a labor economist at career site ZipRecruiter, noted that healthcare alone accounted for roughly 69% of all job growth across 2025, highlighting the unstable foundation of the labor market.
Unemployment Trends and Labor Market Challenges
Long-term unemployment has also climbed, with 26% of all unemployed workers having been out of work for at least six months in December, the highest share since February 2022. This suggests that unemployment is increasingly becoming a permanent state rather than a temporary transition, according to Bachaud.
The hiring rate had fallen to 3.2% in November, one of the lowest rates since 2013, according to Long. The current state of the labor market shows a stark turnaround from the scorching market of 2021 and 2022, when job openings were at record highs, pay growth was at its highest in decades, and workers had considerable leverage.
Factors Contributing to the Hiring Recession
The Federal Reserve raised interest rates to help cool the labor market and rein in inflation, which in 2022 hit its highest level in about four decades. Additionally, several factors coalesced into an anemic hiring environment, including economic policy such as tariffs, business uncertainty, over-hiring in recent years, and a reluctance to hire more workers until the use cases for artificial intelligence become clearer.
While the hiring recession will likely continue in the first half of 2026, the second half should be better for job seekers, due to tax cuts, lower interest rates, and a clearer tariff picture, Long wrote.
Strategies for Job Seekers
There are ways for job seekers to improve their chances at landing a new position, even in a lackluster hiring environment, according to job experts. Employers and recruiters have gradually shifted to “skills-based hiring,” meaning they prioritize a candidate’s skills and experience rather than educational attainment.
Highlighting Relevant Skills and Experience
Job seekers should ensure there’s strong alignment between the job description and the experience and skill sets they outline on their resumes and cover letters. This helps candidates stand out with recruiters and make it through the automated applicant tracking systems on which employers increasingly rely to sort applications.
Targeting Growing Job Sectors
Workers should target certain areas of the job market that are growing, including health care, skilled trades, infrastructure, and revenue-critical jobs, especially within technology. Getting hired in 2026 isn’t necessarily about applying everywhere; it’s about aligning your skills and where employers are actually investing.
The Importance of Networking
Networking is always going to be one of the best friends of job seekers, whether they have a job, are unemployed, or have a part-time role and are looking for full-time work. This can take several forms: engaging with industry and community organizations, and talking to friends and colleagues, either in person or online.
Optimizing Resume Format
Resumes should be in a single-column format with clearly labeled sections, including a headline, about me, achievements, work experience, areas of expertise, and education, if applicable. There’s a myth about the one-page resume; don’t sacrifice experience to shorten your resume.
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Smart Tip for Readers
To increase their chances of landing a job in a competitive market, readers should focus on developing in-demand skills and highlighting their relevant experience in their resumes and cover letters, and utilize online resources to match their skills with job openings.
