Despite a decline in monthly layoffs to 1.2 million in December 2025—the lowest since early 2023—labor market health remains fragile due to stagnant job creation and a sharp drop in new hires. The trend signals underlying weakness that may delay Fed rate cuts despite a softer layoff rate.
- Layoffs declined to 1.2 million in December 2025, the lowest since early 2023.
- Net job creation fell to 185,000 in December—well below the 2023 average of 300,000.
- Hiring in Technology and Consumer Discretionary sectors dropped 20–30% year-over-year.
- Financials added only 42,000 jobs in Q4 2025, a 62% decline from Q4 2023.
- 10-year Treasury yield rose to 4.17%, signaling delayed rate cuts.
- DXY index increased 0.6% as USD strengthened amid expectations of sustained high rates.
The number of job separations fell to 1.2 million in December 2025, down from 1.4 million in November and the lowest level since January 2023. However, this reduction does not reflect a more robust labor market. Instead, it coincides with a 7.3% year-over-year decline in new job additions, with only 185,000 net new positions created in December—well below the 300,000 average seen in 2023. The divergence between fewer layoffs and weak hiring points to employers holding onto existing staff while actively reducing headcount expansion. This dynamic is particularly evident in the Technology and Consumer Discretionary sectors, where hiring rates dropped to 4.1% and 3.8% respectively—down from 5.6% and 5.2% in early 2024. Meanwhile, Financials sector job growth has flattened, with only 42,000 new roles added in Q4, a 62% decline from the same period in 2023. These trends suggest a labor market in stagnation rather than recovery. Markets reacted with caution: the S&P 500 (SPX) edged up 0.2%, but the Nasdaq Composite underperformed, declining 0.5%, reflecting investor concerns about tech sector hiring. The 10-year Treasury yield (TLT) rose 4 basis points to 4.17%, indicating rising expectations for prolonged higher rates. The U.S. dollar (USD) strengthened, with the DXY index climbing 0.6% as traders priced in delayed Fed easing. The implications are significant. A labor market that appears stable due to low layoffs but lacks momentum in new employment could prolong the Federal Reserve’s pause on rate cuts. Investors in equities, particularly in growth-heavy sectors, face increased volatility as earnings forecasts remain sensitive to hiring trends and consumer spending, which are increasingly tied to labor conditions.