The US labor market stands at a crossroads as economists predict a slow but steady recovery in 2026 after a year of sluggish hiring and rising unemployment. Goldman Sachs forecasts average payroll gains rising to 70,000 per month in 2026, more than double the 32,000 per month seen in 2025. While this sounds promising, Robert Half expects a more modest 57,000 new jobs monthly in early 2026, still slower than recent years.
Job growth expected to more than double in 2026, though economists differ on whether recovery will be robust or merely modest.
The unemployment rate reached 4.6% in November 2025, the highest since September 2021. J.P. Morgan predicts this rate will peak at 4.5% in early 2026 before improving. Though these numbers remain low by historical standards, they signal a clear shift from the red-hot job market Americans experienced just a few years ago.
One bright spot emerges in wage growth. Goldman Sachs expects wages to climb 2.3% in 2026, up from 1.9% in 2025. Notably, wages stayed one percentage point higher than pre-pandemic rates even as hiring slowed. However, Federal Reserve Chair Powell notes that nominal wages need to exceed inflation for years before families truly feel relief at the grocery store or gas pump. For workers to feel real improvement in their purchasing power, wages must outpace inflation before affordability materially improves.
Several factors support cautious optimism. Tax cuts take center stage, with Oxford Economics predicting they will broaden economic strength. Rising tax refunds estimated at $50 to $100 billion could boost consumer spending by 0.2% to 0.4% of annual disposable income. Lower interest rates and steady incomes help stabilize conditions.
Challenges remain plentiful. Companies increasingly turn to artificial intelligence for productivity gains, potentially reducing hiring needs. Trade policy uncertainty and the lingering effects of over-hiring during the pandemic hold businesses back from adding workers. The quits rate sits lower than pre-COVID levels, suggesting workers feel less confident about finding new opportunities. Employers are now hiring for impact, creating or recruiting for new positions only when a clear business case and expected outcomes exist.
The Federal Reserve penciled in one additional rate cut for 2026, though more cuts remain possible if the labor market weakens further. The coming months will reveal whether America’s job engine simply needs a tune-up or faces more fundamental problems ahead.
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