Employment grew by an average of 165,000 jobs per month in the fourth quarter of 2025, the slowest pace since the pandemic recovery began in mid-2020. Despite the deceleration, the unemployment rate held at 3.9% throughout the quarter as labor force participation remained stable at 62.6% and the household survey showed continued employment growth.
The Q4 slowdown was widely anticipated. The cumulative impact of 525 basis points of Federal Reserve rate hikes from 2022–2023 was finally fully feeding through to interest-rate-sensitive sectors, and seasonal hiring around the holidays came in below historical norms — particularly in retail and warehousing, where employers leaned more heavily on automation and existing staff.
Healthcare led with 175,000 jobs added across the quarter, government added 65,000, and leisure and hospitality added 52,000. Manufacturing shed 18,000, transportation and warehousing shed 22,000, and information shed 14,000 — the latter reflecting continued AI-driven restructuring at large tech employers.
Wage growth slowed to 4.1% year over year by December, down from 4.6% at the end of 2024. The Atlanta Fed's wage tracker, which controls for compositional shifts in the workforce, showed a similar deceleration. The job switcher premium narrowed materially through the quarter, suggesting that the easy gains from quitting one job for another were largely exhausted.
The JOLTS data for Q4 painted a consistent picture. Job openings averaged 8.4 million, down from 9.1 million in Q3 and well off the 12 million peak of early 2022. The quits rate fell to 2.2% — the lowest since 2018 — as workers became more cautious about voluntary moves. Layoffs and discharges remained low, however, indicating that the slowdown was driven by reduced hiring rather than by widespread job losses.
By demographic, prime-age (25–54) employment-population ratios held steady, with the female ratio actually ticking up to 75.6% — a record high. The black unemployment rate ended the year at 5.6%, the white rate at 3.5%, and the Hispanic rate at 4.8% — all near cycle lows. Long-term unemployment (those out of work for 27 weeks or more) ticked up modestly but remained well below pre-pandemic averages.
Regionally, the South continued to lead employment growth, accounting for over 40% of net new jobs in 2025. Texas, Florida, North Carolina, and Georgia were the standout states. The Northeast and Midwest grew more slowly, and California's growth was concentrated in healthcare and government — with continued weakness in tech.
The Q4 report set the stage for a 2026 in which job creation moderates further but the labor market avoids outright weakness. The Federal Reserve, in its December projections, characterized the labor market as 'gradually rebalancing' — a description that turned out to be apt and that has continued to apply to 2026 data.