2025 U.S. Labor Market Recap: A “Low Hire, Low Fire” Year for Employers

The Big Picture

The U.S. labor market cooled meaningfully in 2025, shifting from the fast, tight conditions of the prior two years into a more cautious, slower-moving environment. Hiring did not collapse, and most employers avoided broad-based layoffs. But job growth slowed to a crawl, job openings continued to trend down, and workers had less leverage than in 2024. In practice, many organizations operated in a “low hire, low fire” market: fewer new roles, fewer job switches, and steadier employment levels overall.

This cooling showed up in several ways HR teams could feel. Recruiting timelines often lengthened as requisitions faced more scrutiny, internal backfills became more common than net-new headcount, and compensation pressure eased slightly outside of hard-to-staff roles. Candidates, especially in mid-level corporate roles, faced more competition, while employers became more selective and more willing to wait for the right fit.

A key wrinkle: some labor market data collection was disrupted by a federal government shutdown in fall 2025. That disruption affected certain monthly series and created gaps or limitations in some releases, which means month-to-month comparisons during that period should be interpreted with caution.

2025 in 8 Key Numbers

1) Payroll job growth slowed sharply

• Total nonfarm payrolls increased by 584,000 in 2025, an average of 49,000 jobs per month.
• For context, BLS reported 2.0 million jobs added in 2024.

2) Unemployment drifted higher by year-end

• The unemployment rate was 4.0% in January 2025.
• It ended the year at 4.4% in December 2025.

3) Job openings fell and worker leverage softened

• Job openings were 7.1 million in November 2025, down 885,000 year over year.
• The job openings rate was 4.3% in November.

4) Hiring stayed subdued, not collapsing

• Hires were 5.1 million in November 2025 (hire rate 3.2%).

5) Quits were relatively low

• Quits were 3.2 million in November (quits rate 2.0%), a sign workers were less likely to jump jobs than during the post-pandemic peak.

6) Layoffs stayed contained

• Layoffs and discharges were 1.7 million in November (layoff rate 1.1%).

7) Wage growth continued, but slower than recent years

• Average hourly earnings rose 3.8% over the past 12 months as of December 2025.

8) Real (inflation-adjusted) pay improved modestly

• Real average hourly earnings were up 1.1% from December 2024 to December 2025.
• Inflation (CPI-U) was 2.7% year over year in December 2025.

Where Jobs Grew and Where They Didn't

Even in a slow-growth year, some sectors continued to add workers.

• Health care continued its upward trend, averaging +34,000 jobs per month in 2025.
• Food services and drinking places averaged +12,000 jobs per month in 2025.

By late 2025, several major industries showed little month-to-month change, reflecting broader employer caution. BLS specifically noted little or no over-the-month change in several major categories, including manufacturing and professional and business services.

One clear exception was federal employment: BLS reported federal government employment down 277,000 from its January peak.

What this meant for HR teams in 2025

Recruiting was harder for candidates, not necessarily easier for employers.

Openings declined and quits remained low, but hiring also slowed. Many organizations operated in a “low hire, low fire” environment: fewer new roles, fewer voluntary exits, and no broad layoff wave.

Compensation pressure eased, but did not disappear.

Nominal wage growth ran near 4% at year-end, while inflation was in the high-2% range, leaving modest real gains.

Workforce planning became more important than speed.

With slower growth and softer demand signals, many companies shifted toward selective hiring, internal mobility, and tighter headcount governance rather than expansion.

Practical takeaways for 2026 planning

• Budget for smaller average increases than the prior two years, but keep targeted adjustments for hard-to-fill roles and internal equity. (Wage growth ended 2025 at 3.8% YoY.)
• Refresh your recruiting funnel metrics (time-to-fill, offer acceptance, source performance) because a slower labor market often changes where quality candidates come from.
• Double down on retention in critical roles, even if quits are low overall. A low-quits environment can hide risk in specific job families.
• Monitor openings and hires, not just unemployment. Job openings (and the hiring rate) often signal shifts in demand earlier than headline unemployment.

Source: Bureau of Labor Statistics