US hiring has slowed to recession-like levels. Hiring rate at 3.3%, comparable to 2020 crisis conditions and lowest in 13 years

US hiring has slowed to recession-like levels. Hiring rate at 3.3%, comparable to 2020 crisis conditions and lowest in 13 years

U.S. Hiring Rate Hits 13-Year Low, Raising Recession Concerns

The U.S. hiring rate has fallen to 3.3% in January 2026, matching levels last seen during the 2020 COVID-19 crisis and marking the lowest rate in 13 years. This decline signals a stark slowdown in labor market momentum, with total payroll job growth in 2025 reaching fewer than 600,000—a fraction of the 1.9 million annual average over the prior decade. Despite a broader economy that expanded at a solid pace through 2025, the disconnect between GDP growth and weak hiring has intensified fears of a potential recession.

The unemployment rate remains at 4.4%, but it has risen by nearly one percentage point over three years, reflecting a gradual tightening of labor demand. Job openings have plummeted to 6.5 million, down from a peak of 12 million in recent years, while the ratio of job openings to job seekers has fallen to 0.9—meaning fewer positions are available than unemployed individuals. This imbalance is particularly acute for new workforce entrants, with entry-level opportunities dwindling in key sectors.

Structural factors are driving the slowdown. High interest rates have increased the cost of expansion, pushing companies to prioritize efficiency over hiring. Automation and AI advancements have further reduced the need for entry-level staff, enabling firms to boost productivity without adding payrolls. Federal Reserve officials are divided on whether the weak hiring reflects cyclical economic cooling or deeper structural shifts. While some advocate for rate cuts to stimulate demand, others caution that monetary policy alone may not address underlying labor market challenges.

Economists estimate a 35–45% probability of a recession in 2026, driven by concerns that weak hiring could erode consumer confidence and spending. Policymakers now face critical questions about the role of fiscal support, immigration policy, and labor market adaptation in sustaining long-term growth.

(Economic Times, January 2026)