2025 was a year of slowing job gains, a bifurcated consumer economy and trade war uncertainties. These negative trends will likely continue and intensify in 2026. The last jobs report for the year produced by the Bureau of Labor Statistics only further confirms the anemic nature of the jobs market. The economy added a modest 50,000 jobs last December, with the vast majority of gains being in the healthcare and social assistance sectors.
Last year saw a tremendous slowdown in job gains, with over 600,000 Black women leaving the workforce. While the Black unemployment rate receded from its multi-year high of 8.2% last November, it remains elevated relative to its level at the beginning of 2025. The Hispanic unemployment rate reached its highest point in 4 years (5.5%), led by a surge in joblessness for Hispanic women.
The major theme of the 2025 labor market was the unwillingness of companies to hire applicants and the relatively low number of layoffs. Dubbed the low-hire/low-fire jobs market, it was also marked by the dominance of just one industry: healthcare. Without the healthcare industry, the economy would have lost a staggering 129,000 jobs last year.
The chart below details the fact that the economy added a net (gains minus losses) 584,000 jobs last year, while healthcare added a net 713,000 jobs:
The increase in the aging population in the US has led to a greater demand for healthcare workers and social service providers, two industries that comprise around 77% and 84% women in their ranks, respectively. While the healthcare sector is known for relatively high-paying careers, Black women tend to be confined to lower-paying roles. Of all major industries, healthcare support occupations have the lowest yearly wages, which comprise the bulk of healthcare and social assistance sector jobs. This likely means that the majority of the employment growth seen last year was due to increases in these low-paying healthcare jobs.
The stagnant labor market can be broadly attributed to the uncertainties stemming from the tariffs. No industry epitomizes the destructive nature of this more than the manufacturing sector, the sector the President stated would benefit the most from his protectionist tariffs. Since tariffs were announced in April of last year, the manufacturing sector has experienced eight consecutive months of job losses totaling 72,000 jobs.
Layoffs were at their highest level since 2008 (excluding 2020) and, even worse, planned hiring rates were at their lowest since 2010. “Negative market conditions” was the most cited reason for the layoffs. These figures were compiled by the outplacement firm Challenger given that possibly biased government data sources maintain that overall layoffs remain low.
In addition to the high probability that we’re in a low-fire/low-hire labor market, the broader economy resembles what is commonly described as a “K” shaped economy. This moniker denotes an economy where higher-income households buoyed by rising asset prices contribute to an increasing share of consumer spending, while low and middle-income households end up cutting back on consumer spending. This phenomenon is evident in Delta Airlines’ 2025 record earnings, where, despite a 7% decline in revenue from economy cabin tickets, premium seating ticket revenue increased by 9%.
Despite comprising a greater share of consumer spending, higher-income households were consistently more pessimistic about the state of the labor market and future unemployment trends than their lower and middle-income counterparts throughout 2025. In fact, higher-income households recorded their lowest index score since the depths of the Great Recession in the latest Survey of Consumers released last November.
Recently, new tariffs on several European countries were announced, with the European Union threatening to deploy a “trade bazooka” in response. Formerly known as the “Anti-Coercion Instrument,” it is a multi-layered retaliatory strategy that could involve steep tariffs, customs restrictions and, perhaps most severe, the full closure of the European market to US companies.
If the trade war between Europe and the United States escalates, many of the goods that low- to moderate-income households buy could increase drastically in price. Because lower-income households spend more of their income on items like food, they experience greater impacts of inflation than higher-income households. A US-Europe trade war would only add to their inflation worries and further depress an already stagnant job market.
It also illustrates the three core issues facing the US economy: a potentially devastating trade war, a worsening job market and increasing disparities between lower-income and higher-income households. For the sake of those least responsible but most vulnerable to these headwinds, let us hope disaster can be averted.
Joseph Dean is the Jr. Racial Economic Research Specialist with NCRC’s Research team.
Photo credit: Kelly via Pexels.
