How job seekers can stand out in a hiring recession

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.

“It’s fair to say that 2025 was a hiring recession in the United States,” Heather Long, chief economist at Navy Federal Credit Union, wrote in a note Friday. That recession affects both blue- and white-collar workers, she wrote.

U.S. employers added 584,000 jobs last year, according to a Bureau of Labor Statistics report issued Friday. That marks the worst year for total job gains outside of a recession since 2003, according to Long. There has been little job creation since April, meaning most gains took place early in the year, she wrote.

Most hiring has also been concentrated in the health-care sector, making it difficult for workers to participate across the broad labor market, economists said.

“Healthcare alone accounted for roughly 69% of all job growth across 2025,” Nicole Bachaud, a labor economist at career site ZipRecruiter, wrote in a note Friday. “The reliance on a single industry to keep job growth positive uncovers the unstable foundation in play going into 2026.”

Long-term unemployment has also climbed. In December, 26% of all unemployed workers had been out of work for at least six months, the highest share since February 2022, according to the BLS.

That suggests “unemployment is increasingly becoming a permanent state rather than a temporary transition,” Bachaud said.

On Wednesday, the Bureau of Labor Statistics reported the hiring rate had fallen to 3.2% in November. That’s one of the lowest rates since 2013, according to Long.

At that time, the so-called “great resignation” was in full swing, with job openings at record highs, pay growth at its highest in decades and workers able to leave their jobs in droves for better positions.

Economists called that labor market, in which workers enjoyed considerable leverage, unsustainable over the long run.

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, Long wrote: 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.