Today, we’re joined by Ling-yi Tsai, an HRTech expert with decades of experience helping organizations navigate change through technology. As 2025 closes, the U.S. labor market is sending mixed signals. A long-delayed jobs report, complicated by a government shutdown, paints a picture of a slowdown that is both uneven and uncertain. We’ll be diving into the nuances of this “flashing yellow” market, exploring the starkly different paths of various industries, the dual pressures of reduced hiring and a shrinking workforce, and what the cooling trend in wage growth means for both employees and the broader economy heading into the new year.
The latest report shows employers added only 64,000 jobs in November while unemployment hit 4.6%. Beyond these top-line figures, what underlying metrics should we be watching to gauge the true health and momentum of this “flashing yellow” labor market?
Those headline numbers really only scratch the surface of what’s happening. When you peel back the layers, the foundation looks much less stable. The first thing I look at is the lopsided nature of the growth. We’re seeing job gains heavily concentrated in just two sectors, health care and construction, which tells me the market’s strength is very narrow. More concerning is the data we almost missed. The government shutdown masked a net loss of 105,000 jobs in October, a significant downturn that was largely invisible in real-time. We also have Federal Reserve Chair Jerome Powell explicitly warning that the employment data is likely to be revised downward in early 2026. So, the real health isn’t in the 64,000 jobs added; it’s in the fragility, the sectoral imbalance, and the high probability that the situation is actually softer than the current data suggests.
We saw a stark divergence in November, with health care and construction adding jobs while manufacturing and hospitality cut them. Can you break down why these specific sectors are on such different trajectories and what this lopsided growth means for workers’ career mobility?
It’s a tale of two economies, really. On one side, you have health care, which added 46,000 jobs. This sector has persistent, non-cyclical demand driven by demographics and essential needs. Construction, which added 28,000 roles, is still benefiting from large-scale infrastructure projects and a housing market that hasn’t completely cooled. On the other side, manufacturing is feeling the direct impact of higher borrowing costs, shedding 5,000 jobs as business expansion slows. And the 12,000 jobs lost in leisure and hospitality are a classic canary in the coal mine, signaling that households are finally cutting back on discretionary spending. For workers, this creates a challenging landscape. If you’re not in health care or construction, your options are shrinking. It makes career pivots much more difficult and leaves those laid off from struggling sectors with fewer places to land, significantly reducing their mobility and bargaining power.
The article cites two causes for the slowdown: employers hiring less and slowing labor force growth. From your perspective, which of these factors is exerting more pressure on the market, and how does this dynamic change the job-seeking strategy for someone entering the workforce today?
Both are significant, but they operate on different timelines. Right now, the acute pressure is coming from employers pulling back on hiring. This is a direct response to the economic environment—higher interest rates and a focus on cost moderation are making businesses cautious. You can feel this immediately in the reduced number of open positions. The slowing labor force growth, driven by retiring baby boomers and reduced immigration, is a more chronic, structural issue. It’s a slow-moving force that reshapes the market over years, not months. For someone entering the workforce today, this dual pressure completely changes the game. The “Great Resignation” mindset of constant job hopping for better pay is over. The new strategy must be about demonstrating stability and value. Job security is a premium again, and you have to prove you’re an essential asset, not just a temporary hire, because the opportunities to simply jump to the next best thing are becoming far less frequent.
Average wages rose 3.5% in November, but this growth is slowing down. What specific ripple effects do you expect to see for both consumer spending and business investment if wage gains can no longer keep pace with inflation in the coming year?
That 3.5% figure is one of the last remaining bright spots, but its cooling trend is worrying. If wage growth slips behind inflation, the first and most immediate ripple effect will be on consumer spending. We’re already seeing early signs of this with the job cuts in hospitality. Households will lose their modest gains in buying power, forcing them to pull back further on non-essential goods and services. This creates a feedback loop. When consumers stop spending, businesses see their revenues decline, which in turn makes them hesitant to invest in expansion, new equipment, or even new hires. So, while slowing wage growth might seem like a relief for employers’ bottom lines initially, it ultimately undermines the consumer demand that their businesses depend on, leading to a more sluggish and cautious economic environment for everyone.
The government shutdown significantly delayed jobs data, masking October’s downturn. Can you elaborate on the long-term risks of policymakers making crucial economic decisions with incomplete information, and what steps could be taken to mitigate the impact of such disruptions in the future?
The risk is immense; it’s like asking a pilot to fly through a storm with a faulty altimeter. Policymakers, especially at the Federal Reserve, rely on this data to make critical decisions on interest rates that affect the entire economy. Operating with incomplete information, like not knowing October’s unemployment rate, means they could misjudge the economy’s trajectory. They might keep rates too high for too long, tipping a slowing economy into a recession, or they could cut rates too late, failing to support a market that’s weaker than they realize. To mitigate this, we need to build more resilience into our data infrastructure. This could involve creating statutory protections for key economic reporting agencies to ensure they are funded and operational regardless of broader political disputes. We could also accelerate the integration of more real-time, high-frequency data from private sources to supplement official reports, ensuring that even during a shutdown, we aren’t flying completely blind.
What is your forecast for the U.S. labor market in 2026?
My forecast for 2026 is one of cautious stabilization, not a crash. The era of rapid, frenetic hiring is definitively over. I expect to see continued but modest job growth, likely staying concentrated in resilient sectors like health care. The biggest challenge for workers will be that wage growth will likely struggle to meaningfully outpace inflation, meaning that feeling of getting ahead financially will be elusive for many. For businesses and employees alike, the theme will be adjusting expectations. The market will feel much more constrained, and the priority will shift from rapid growth and job-hopping to stability and security. After a year of uncertainty and disrupted data, the most valuable commodity in the 2026 labor market won’t be a massive signing bonus, but simply clarity.