Demand for labor in the USA is falling – the job market between stagnation and weakening

Recent US labor market data indicate a clear weakening of demand for labor at the lowest level in 14 months. The US Department of Labor reported that job openings fell in November to 7.146 million, the largest decline in 14 months. At the same time, employers remain cautious in making decisions about mass layoffs, creating a paradoxical situation that economists describe as “hiring pause without layoffs.”

This unfavorable demand dynamic reinforces the belief that the Federal Reserve will keep interest rates unchanged in the coming months. Marc Giannoni, chief economist at Barclays, commented: “The JOLTS data for November show a clear decline in job openings, with minimal signs of a drastic deterioration in market conditions.”

Job openings plummet – what the data say

Demand for labor, measured by the number of available positions, decreased by 303,000. Compared to October, when there were 7.449 million job openings, this is a significant decline. Analysts surveyed by Reuters expected 7.60 million positions, but market reality proved more pessimistic.

The ratio of job openings to unemployed persons is only 0.91, the lowest since March 2021. This means there are fewer than one available position per job seeker—an indicator of significant weakening in employer demand. The overall vacancy rate decreased to 4.3% from 4.5% in October.

Employment fell by 253,000 to 5.115 million. Although economic growth in the third quarter of 2025 was solid, employment gains remain weak, suggesting a disconnect between economic expansion and new job creation.

Political uncertainty dampens demand for labor – tariffs and AI automation as recruitment brakes

Economists unanimously point to two main factors suppressing demand for labor. First, unpredictability in trade policy, especially related to proposed import tariffs, causes companies to hold off on recruitment processes. The US Supreme Court was expected to issue a ruling on Friday (January 7) regarding the legality of broad global tariffs imposed by President Donald Trump—this court decision hangs over corporate hiring strategies.

Second, the integration of artificial intelligence across many business sectors reduces the need for personnel. Some employers actively replace worker roles with automation solutions, further lowering demand for traditional labor.

Sarah House, senior economist at Wells Fargo, warned: “Although the number of layoffs remains moderate, the low voluntary resignation rate increases the risk that companies seeking to reduce employment may be increasingly forced to cut rather than rely on natural employee turnover.”

By sectors – where demand for labor is disappearing and where it is rising

The decline in labor demand is uneven. The accommodation and food services sector experienced the largest losses—job openings decreased by 148,000. Healthcare and social assistance saw a drop of 66,000 vacancies, despite being major drivers of employment growth last year.

Transportation, warehousing, and public services recorded 108,000 available jobs, while wholesale trade lost 63,000 openings. Public administration declined by 89,000 positions, mainly at state and local levels. Only federal administration showed growth—by 8,000 positions.

Positively, the construction industry added 90,000 job openings, and retail trade jumped by 121,000 vacancies, likely due to preparations for the holiday season. Demand in these areas remained resilient despite the overall downward trend.

Record-low layoffs – but voluntary resignations weaken

Layoffs decreased by 163,000 to 1.687 million. This attitude is characteristic of the current economic phase—employers prefer to operate with smaller teams rather than take drastic measures. Meanwhile, voluntary resignations increased by 188,000 to 3.161 million, raising the rate to 2.0% from 1.9%.

This paradox—low demand for labor combined with few layoffs—creates a unique market dynamic. Workers lose motivation to change jobs when employment prospects are uncertain, further reducing natural turnover in the labor market.

Future data – seeking new signals

The Bureau of Labor Statistics is scheduled to release December forecasts on Friday, with expectations of a 60,000 increase in nonfarm payroll employment. ADP private sector employment data showed a rise of 41,000 last month, but Carl Weinberg of High Frequency Economics warned: “The visual signal suggests that jobs increased in December, but at a relatively slow pace.”

The unemployment rate is expected to be 4.5% in December, down from 4.6% in November. These indicators will be crucial in assessing the actual capacity of the labor market to generate new jobs.

Outlook for 2026 – will demand for labor return?

The Institute for Supply Management (ISM) reported that its services sector purchasing managers’ index rose to 54.4 in December from 52.6 in November. The employment index in services rebounded to 52.0% after six months of declines— the first positive signal in recent weeks.

Ben Ayers, senior economist at Nationwide, expressed cautious optimism: “Steady and consistent economic growth in 2026 should keep the services sector in a solid expansion phase throughout the year, especially if fiscal stimuli deliver expected results.”

The US economy may benefit from tax cuts and decreasing trade policy uncertainty. However, unpredictability remains a major threat to the recovery of demand for labor in the coming months. Much will depend on court decisions and the direction of trade policy under the new administration.