U.S. Hiring Slows to Record Low Pace
U.S. job creation has slowed sharply since May. The labor market now shows minimal hiring and very low layoffs, an unusual historical combination.
The U.S. labor market added only 60,000 new jobs between May and July of 2026, with employment even falling in July. Economists predict the August employment report will show a mild gain of just 50,000 jobs, according to a report from MarketWatch.
This lethargy is highly unusual by historical standards. The U.S. is adding the fewest new jobs on record during an economic expansion. Yet businesses are also extremely reluctant to lay off workers. The result is a very still labor market, as described by Nela Richardson, chief economist at payroll processor ADP.
Economists suspect the slowdown could persist. A brief hiring upsurge in the first four months of 2026 has since petered out.
Reasons for the Hiring Slowdown
Businesses have multiple reasons to restrain hiring, with cost control being paramount. The Trump administration's tariffs and oil price increases linked to the Iran war have raised business costs over the past 18 months. Labor is the biggest and most controllable expense for most companies.
Analysts say economic uncertainty spawned by White House policies is another drag. Companies struggle to plan for the future amid repeated domestic and global disruptions.
The rapid improvement in artificial intelligence has also become a potential labor-saving substitute. Companies are experimenting with AI to see if it can replace certain jobs, particularly entry-level or low-skill positions. Gad Levanon, chief economist at the Burning Glass Institute, stated that a lot of low-wage jobs are going to disappear, noting that clerical jobs have been declining for years due to technology.
However, AI's current influence is still small. A new Indeed survey found 52% of labor-market economists thought AI would be only a mild drag on hiring over the next year, while 35% thought it could boost employment.
Replacement Hiring and Sector Exceptions
Businesses are not completely idle. They are replacing workers who leave, a process driven largely by retirements, according to Thomas Simons, chief U.S. economist at Jefferies. Millions of workers leave or switch jobs annually, and those positions need refilling.
The healthcare industry is the notable exception, continuing to add many new jobs due to growing demand from an aging population. Indeed's survey noted that the fastest-growing work is hands-on and beyond AI's reach.
The Layoff Paradox and Unemployment Data
Fortunately for most Americans, job security remains high. The unemployment rate is at an extremely low 4.1%, and layoffs are near their lowest level since the 1960s. Federal Reserve Chairman Kevin Warsh remarked that people who want to work are, by and large, holding or finding jobs.
The number of people applying for new unemployment benefits in mid-August fell to 169,786, a level not seen since 1969 except for a brief period in 2022. This figure represents workers who recently lost their jobs.
Not all economists are impressed by this metric. Heather Long, chief economist at Navy Federal Credit Union, pointed out that retiring seniors and young people struggling to find jobs do not receive unemployment aid.
The number of long-term unemployed has also shrunk, falling to 6.9 million from a four-year high of 7.8 million last November. The reason for this decline is unclear, as the economy added a net of only 450,000 jobs in the same span. Some may have retired, with an estimated 10,000 baby boomers retiring daily. Others may have left the country, voluntarily or through deportation. Some may have simply stopped looking for work and are no longer counted as unemployed.
