Gains in health care, declines in manufacturing highlight tough year for U.S. job market
- - Gains in health care, declines in manufacturing highlight tough year for U.S. job market
Allie CanalJanuary 10, 2026 at 4:45 AM
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U.S. job growth in 2025 was concentrated almost entirely in health care and social assistance, while sectors focused on goods production such as manufacturing and transportation saw declines, reinforcing concerns that labor demand has narrowed rather than broadly rebounded.
The U.S. economy added just 584,000 jobs in 2025, according to data from the Bureau of Labor Statistics, making it the worst year for job creation since the pandemic and the worst year for hiring outside of a recession since 2003.
Economists expected some softness in the labor market in large part due to President Donald Trump’s aggressive cuts to government jobs and immigration crackdowns. But he also promised to spark U.S. manufacturing and revive domestic production, touting tariffs as a way to bring jobs back to American soil.
For now, those sectors are struggling.
The majority of the labor market’s job gains in 2025 came from health care and social assistance, which are service-based industries that have continued to hire steadily amid an aging population and sustained demand for care. Health care alone added about 405,000 jobs last year, while social assistance contributed roughly 308,000. Stripped of those two sectors, the broader labor market would have posted net job losses in 2025.
“Sector participation in jobs creation continues to be anemic with health care, social assistance and food and drinking establishments doing the heavy lifting,” Mark Hamrick, senior economic analyst at Bankrate, said in reaction to Friday’s December report. “The goods producing sector, including manufacturing, failed to add new jobs once again.”
Those goods-producing sectors, which also include mining and logging, wholesale trade, and transport and warehouse, struggled over the past year amid softer demand, elevated borrowing costs and ongoing cost pressures tied to inflation.
“The US is experiencing a jobless boom,” Heather Long, chief economist at Navy Federal Credit Union, wrote in a post on X. “Growth is strong, but there is a ‘hiring recession’ with almost no hiring outside of healthcare and hospitality.”
Notably, Long said, there has been “almost no hiring since April.”
The emergence of powerful generative artificial intelligence also added a new wrinkle for employers looking to boost productivity and rein in costs in a high-interest-rate environment.
On the government side, layoffs tied to the Department of Government Efficiency, the federal initiative previously run by Tesla CEO Elon Musk, contributed to a sharp pullback in federal employment.
Since peaking in January, federal government payrolls are down by 277,000 jobs, or 9.2%, according to the Bureau of Labor Statistics.
That uneven sector growth was reflected in the latest jobs data released on Friday. December payroll growth came in at a sluggish 50,000, and earlier months were revised lower, underscoring a labor market that entered 2026 with limited momentum beyond a few key service industries.
Still, economists say the report, which included a slight dip in the unemployment rate to 4.4%, was strong enough to help the U.S. avoid an imminent recession and keep the Federal Reserve on hold when it comes to interest rates, at least for now.
“The prospect of a January Fed rate cut has all but vanished following the unexpected drop in the unemployment rate,” wrote Seema Shah, chief global strategist at Principal Asset Management, adding the decline makes it harder to argue the labor market is collapsing.
However, Shah said the slower job growth and downward revisions point to a labor market that remains fragile.
“Sustained job losses hardly inspire confidence,” Shah said. “The U.S. economy likely requires additional support from the Fed — just not immediately.”
Source: “AOL Money”
