The U.S. labor market appears to be in a stable yet slower place at the start of 2026, according to several experts. While hiring has slowed in some areas, the data is not showing strong positive or negative movement.
That’s the national view from Rick Hermanns, CEO of HireQuest, a global franchisor of staffing and recruiting companies.
“The labor market is no longer overheated or unraveling; it’s recalibrating,” Hermanns said. Across HireQuest’s national staffing and recruiting network, hiring activity has cooled into what he described as a low-hire, low-fire environment as worker supply and employer demand move closer to balance.
According to HireQuest data, the slowdown has been felt most sharply among white-collar job seekers, even as employers continue to hire selectively. Layoff rates dropped to their lowest level in December since mid-2024, a signal that companies are holding onto workers even as they slow new additions.
“The next phase of the job market will be defined less by headline growth and more by where work is truly needed,” Hermanns said.
Unemployment claims have remained consistent in recent months, although that data might not fully account for the number of people deported in recent months because of Trump Administration policies, said Ron Hetrick, senior labor economist for Lightcast, a supplier of labor market consulting and data.
Hetrick also said the number of workers over 55 is declining at a high rate because of early retirements. But in general, there is little evidence that employees are being laid off at high volumes.
“Unemployment claims aren’t really doing anything, but claims aren’t always the best numbers to look at,” Hetrick said. He refers to lingering “white-collar malaise” in the labor market and that college graduates are finding more success in getting hired for higher-paying jobs compared to candidates without a degree.
The declining number of fully employed workers over the age of 55 may be balanced by the increase in re-entrants and new entrants into the labor force, including people who may have left their jobs during COVID, Hetrick said.
The International Monetary Fund raised its global growth forecast for 2026, with the U.S. expected to expand around 2.4% this year, helped by strong investment—especially in AI infrastructure. Professionals who can work in that AI space are likely to be in demand, but other areas may struggle to reach comparable labor heights. New York Federal Reserve President John Williams described the labor market as “softer” and the Fed as prepared to balance inflation and employment on January 12.
At the time, Williams acknowledged slower job hiring and weak labor demand were acknowledged, though employment stays resilient amid gradual inflation deceleration.
Following the government shutdown that ended on Nov. 12, economists have been forced to turn to other resources than the BLS for job reporting data. While some data is missing, the Gerald R. Ford School of Public Policy at the University of Michigan Professor of Public Policy and Economics Betsey Stevenson believes that there is evidence to suggest that hiring has dramatically slowed.
“We have ongoing job growth, but it is much, much slower than what we had before. And then we’re putting this together with data that says that we’re seeing a pickup in some (number) of layoffs,” Stevenson told MSNBC and Yahoo News late last year. “(This means) there’s a slowdown in businesses forming, businesses hiring people, and all of that leads to a slowdown in the labor market.”
Stevenson also asserted that the combination of rising inflation and a slowing labor market “is a recipe for a really uncomfortable economy.”
The number of Americans who applied for unemployment benefits inched up in mid-January, but U.S. layoffs remain historically low despite signs of a softening labor market, according to data released by the U.S. Labor Department on January 22.
U.S. filings for jobless aid for the week ending Jan. 17 rose by 1,000 to 200,000, up from 199,000 the previous week, the Labor Department reported, relatively inline if not slightly lower than consensus estimates.
Hetrick cautions workers to remember that despite some slowing, the labor market remains in a fairly strong place historically as the number of job openings are significantly higher across all industries than during periods of 2008-2010, the last significant U.S. recession.
“We can’t have recency bias when we look at these numbers,” Hetrick said. “We’re still in a pretty strong place.”
Variable expectations across sectors
Construction continues to stand out as a resilient and attractive career path within the labor landscape, said John Mielke, senior director of apprenticeships at Associated Builders and Contractors in Washington DC. He believes construction and related industries offer multiple career options for job seekers looking for stable, well-compensated work with long-term growth potential.
“Construction offers careers of choice for people who want high demand, rewarding employment and real opportunities to climb the career ladder,” Mielke said.
Elsewhere, demand remains strongest in essential hands-on roles that cannot be automated and in sectors tied directly to productivity and technology adoption. Hermanns said the hottest hiring areas across the HireQuest network include skilled trades—particularly construction and engineering roles connected to data centers, energy projects, and infrastructure development—along with manufacturing and logistics.
“These are roles that directly support output and can’t be easily replaced by technology,” Hermanns said. In contrast, administrative, human resources, and traditional corporate support roles continue to see softer demand as companies consolidate functions and invest more heavily in automation.
Manufacturing is witnessing a period of employee shortages for several years with some experts suggesting an overall shortage of as many as 400,000 manufacturers.
Yet the bigger issue in manufacturing may be the lack of qualified candidates. David Gitlin, the chairman and chief executive of Carrier, told media outlets last summer that “for every 20 job postings that we have, there is one qualified applicant right now.” Carrier Global produces air-conditioners, furnaces and related services and a range of heating and cooling equipment options.
Gitlin believes this problem will exacerbate if more manufacturing is returned to the U.S. from overseas given the Trump Administration’s existing (U.S.-focused) trade policy.
Hiring in healthcare remains strong, especially for nurses, Hetrick said. Lower-paying jobs in the restaurant and food services industry are also plentiful as it claws its way back from the depths of the COVID impact. “That may not be what we want to hear, given they are lower paying, but restaurants are hiring,” Hetrick said.
Notably, hiring is weak in the federal government given cutbacks in many departments by the Trump Administration.
“Every (other industry) is pretty unremarkable, just a lot of statistical noise,” Hetrick said. “There’s been (little movement) since 2024.”
Non-traditional skills matter
According to Mielke, the most valuable skilled workers in today’s economy bring more than technical expertise to the jobsite – a trait that is important across all industries. Mielke emphasized the importance of lifelong learning and ongoing upskilling, particularly as safety standards evolve and new technologies are introduced to improve productivity and quality.
“Commitment to safety and health for the entire team, and an interest in technologies that improve outcomes, are increasingly important,” he said.
Soft skills also play a growing role. A strong work ethic, teamwork, and a willingness to mentor others can significantly enhance a worker’s value and long-term prospects. “Those qualities often take skilled workers even further than technical ability alone,” Mielke said.
Across industries, Hermanns said employers consistently point to interpersonal skills as the most significant gap in today’s workforce. “Handshake skills—the ability to communicate clearly, collaborate effectively, and show confidence—are the biggest gap we hear about,” he said.
Drawing on data from HireQuest’s more than 400 locations, which place roughly 70,000 people annually, Hermanns said companies are often willing to train hard skills but prioritize candidates who can build trust and solve problems with others. Even in the trades, he said, those soft-skill moments have become the top factor separating seasoned hires from entry-level workers and often determine whether employers are willing to take a chance on younger talent.
Salaries remain competitive despite other narratives
Compensation remains one of the most persistent points of tension in the labor market. Hermanns said many employers and candidates remain misaligned on salary expectations, a gap that continues to stretch hiring timelines for key corporate roles.
“We’re still seeing employers search for ‘unicorn’ candidates at pre-2020 pay scales,” he said, even as many companies’ budget salary increases in the low-to-mid 3% range for 2026. In the current environment, Hermanns added, “competitive compensation is non-negotiable for employers who want to attract and retain top talent.”
Several other skill areas remain especially hot as large-scale infrastructure and technology projects expand. Hermanns pointed to skilled trades and engineering roles driven by widening skills gaps, particularly among mechanics and technicians. Healthcare hiring remains strong as well, especially for nursing and therapy positions.
Hetrick said there has been a narrative in the broader media that salaries are lower for most industries, but that’s not what the macroeconomic data indicates. He called wages “sticky,” but said that both earnings and salaries rose in 2025. “We saw that in both profit and non-profit sectors.”
The AI impact
Demand for IT, automation, and AI-related roles continues to rise, though Hermanns noted that training pipelines have struggled to keep pace with rapid changes in required skills. “That gap is becoming one of the defining challenges for employers,” he said.
Trade policy uncertainty also shaped hiring behavior over the past year. Hermanns said tariffs contributed to a broad sense of economic caution in 2025, prompting many employers to delay decisions and adopt a wait-and-see approach. “Budget constraints and uncertainty slowed hiring,” he said. Looking ahead, easing tariffs are expected to support renewed momentum in key sectors.
“We’re optimistic for 2026 as manufacturing and construction, in particular, begin to reignite,” Hermanns said.
Artificial intelligence is already reshaping both recruiting operations and the broader labor market. From a staffing standpoint, Hermanns said AI tools help speed up hiring processes and improve match quality between candidates and employers. From a labor perspective, its impact is most visible in clerical, warehouse, and logistics roles that rely on repetitive tasks.
“AI has become an overused buzzword,” Hermanns said, “but not all technological advancements involve machine learning, and many technical roles will continue to be led by people.”
Hetrick agrees that the impact of AI on current labor market data has been largely overstated. It hasn’t significantly affected hiring, possibly because companies are still determining how to best utilize AI to support efficient operations.
“There’s a lot of hype around AI, but the data doesn’t bear out the impact,” Hetrick said. He indicated the most highly desired skills that employers are looking for have remained consistent since 2019, centering around communications, management and leadership. As a result, higher-performing candidates remain in demand. Some of those hires may help to manage AI operations moving forward.
“There’s been an increase in demand for workflow management, (possibly) because companies are still figuring out how AI impacts them,” Hetrick said.
Despite those insights, technology investment is a central part of many employers’ core strategies, according to JPMorganChase’s 2026 Business Leader Outlook, released in January. A growing majority of small business owners now see AI as essential to maintaining competitiveness over the next three years, and many expect it to help streamline operations and improve efficiency, according to the study.
More than half of respondents to the Business Leader Outlook anticipated broader economic stabilization in 2026, along with smoother supply chains after several years of disruption that will lead to a moderately stronger labor market across numerous sectors in the second half of the year.
Stevenson has publicly urged that AI will have striking impacts on the average American family.
“We are seeing increasing investment in AI, labor-replacing technology, they’re putting huge demands on energy, and nobody is talking about how we’re going to make sure that this benefits regular families, rather than hurting regular families,” she said in November.
The immediate effect right now is pain for those regular families, Stevenson adds. “People seeing their kids graduating from college and not being able to find a job, people seeing their electricity bills go up,” she said.
What small business sees
Small businesses are entering 2026 with a parallel sense of cautious confidence and adaptability. Throughout 2025, owners contended with persistent cost pressures and shifting economic signals, but sentiment strengthened as the year progressed, according to JPMorganChase’s Business Leader Outlook.
“Small business owners are operating with a mix of optimism and pragmatism,” said Ben Walter, CEO of Chase for Business. “They’re making smart investments and doubling down on innovation, setting the pace for Main Street in the year ahead while adapting to shifting market dynamics.”
More than 60 percent of small business owners say they feel more positive about their own business now than at any point in the past five years, according to the study, which was released in early January. Surveys show that 74 percent are optimistic about their company’s outlook for 2026, holding relatively steady compared with mid- and late-2025. About 76 percent expect revenue growth and higher profits in the coming year, while 53 percent plan to increase headcount, a modest uptick from earlier in 2025. Only 27 percent expect a recession in 2026, down sharply from 39 percent at midyear.
At the same time, small business owners remain acutely aware of ongoing challenges. Inflation, cost pressures, and tariffs continue to rank among their top concerns, which in turn also impact hiring. To ensure they have the capital needed to hire necessary talent, many employers are building flexibility into their operations by increasing cash reserves, renegotiating supplier terms, and investing more heavily in marketing and technology, the study revealed.
Looking ahead, Hermanns said HireQuest remains cautiously optimistic that 2026 will bring a period of stabilization rather than volatility. Data from across the HireQuest family of brands points to steady or improving conditions in several segments of the labor market. HireQuest Direct, which focuses on front-line and skilled labor, continues to report fast fill times—often one to three days—with most offices seeing stable demand as industrial activity rebounds.
Hermanns points to Snelling, which serves industrial and professional staffing needs, is experiencing steady growth led by healthcare and manufacturing. He also referenced that MRINetwork, which is focused on executive and specialized recruiting, has longer hiring cycles of 45 to 70 days, but maintains a cautiously positive outlook as investment stabilizes and AI tools assist with candidate sourcing.
Taken together, these signals suggest a labor market and small business environment that are no longer defined by extremes, but by adjustment—one in which adaptability, targeted investment, and a renewed emphasis on both technical and human skills are shaping decisions on both sides of the hiring equation.
“These are positive signs (amid periods of) uncertainty,” Hermanns said.
