The U.S. labor market remains resilient despite rebalancing, with December adding 256,000 jobs. 2025 outlook shows continued healthcare sector growth but potential challenges from declining labor supply and rising unemployment.
According to the BLS release, 256,000 new jobs were added in December, much higher than the 165,000 that was forecasted. Gains throughout 2024 were primarily concentrated in three areas: healthcare, government, and leisure and hospitality.
In December, healthcare added 46,100 jobs, with notable gains concentrated in home health. Monthly gains in this sector fell below the average of 57,000 jobs per month in 2023 and 2024.
The government sector added 33,000 jobs in December, below the average of 37,000 per month and far below the 2023 average of 59,000.
The leisure and hospitality sector added 43,000 jobs in December, up significantly from the 2024 monthly average of 24,000, which is half the 2023 average of 47,000 per month.
Although retail wasn’t a top sector to add jobs in 2024, it’s worth noting that in December job gains were up 43,000, following a loss of 29,000 jobs in November. Revelio Labs recently reported that grocery stores are leading the hiring surge within this sector, driven by inflation-induced demand for essentials and value-focused purchases.
November saw 8.1 million job openings, up from 7.8 million in October. However, at the same time, hires fell to 5.3 million, or 3.3%. This hire rate is now lower than before the pandemic; November 2019 for comparison, had 5.8 million hires.
Chart Source: Federal Reserve Bank of St. Louis
Quits also fell to 1.9%, down from 2.1% in October. The quits rate is a good indicator of job seeker confidence, which fell during the first three quarters of last year. From a historical perspective, a higher quit rate can indicate a stronger labor market—one where workers feel confident enough to leave their current jobs.
ZipRecruiter published its latest job seeker survey data and found a 5.9-point increase in confidence as 2024 closed. Confidence increases were higher for men than women and full-time workers than part-time workers. Job seeker confidence to close the year is at the same level as Q4 the year prior.
Relatedly, Glassdoor reports that employee confidence dropped in December, sitting at the same level as December 2023. This is not too surprising since two-thirds of workers say they feel stuck in their careers.
It will be interesting to see how this evolves in 2025, as many job seeker surveys indicate that the number of people looking for new jobs is increasing this year.
Unemployment remains low at 4.1%, down from 4.2% the month prior, but has been trending up disproportionately for recent new graduates, as seen in the green line on the chart that LinkedIn shared below.
New grads looking for a job now face a much more challenging situation than in the last few years, as hiring for white-collar roles requiring a degree has decreased. The job-finding rate, defined as the odds of finding a job in any given month, as reported by the BLS, has fallen to 23.8%, down from the pre-pandemic rate of 29.9%.
2025 may provide more opportunities for new graduates, though, as NACE reports that hiring will increase by 7.3% for the Class of 2025 compared to the Class of 2024.
On the supply side, Indeed’s economic team summarized the situation aptly: “Employers must figure out a way to do more with less.” As the U.S. population ages into retirement and new pressures on immigration arise with the incoming Trump administration, the overall labor supply is expected to decline. Embracing AI to boost productivity in industries with tight labor supply will be critical.
It’s hard to predict how monthly job gains will shake out, but one projection is that gains will range between 100,000 and 125,000 in early 2025. The BLS also projects an annual growth rate of .4% for total employment, reaching 176.4 million by 2033. This is a notable decline from the 1.3% yearly growth experienced between 2013 and 2023.
From a demand perspective, the incoming administration may also impact job growth. Government hiring averaged around 38,000 jobs in 2024, but job gains in this sector could decline once the Department of Government Efficiency is established. On the other hand, anticipated deregulation may drive hiring in other sectors, such as manufacturing. Deregulation could also spur innovation, potentially creating a more favorable environment for the technology sector. In particular, AI and machine learning roles will be in high demand.
Healthcare and social services, an industry already facing severe supply constraints, is expected to add the most jobs. Employers within these industries facing constraints must focus on upskilling workers to mitigate.
For more on 2025 job growth, check out LinkedIn’s top 25 fastest-growing jobs.
Unemployment may rise in 2025. Daniel Zhao, the lead economist for Glassdoor, noted in a recent labor market article that forecasters project the unemployment rate to increase to 4.3% by Q4 2025. Rising unemployment could intensify competition among job seekers, compounding the challenges in an already competitive labor market. According to Reuters, 2024 concluded with the median duration of unemployment slightly decreasing to 10.4 weeks after hitting a three-year high of 10.5 weeks in November.
Watching long-term unemployment as we head into the new year will be interesting. In December, it remained unchanged at 1.6 million; however, it was up 278,000 from the prior year and accounted for 22.4% of all unemployed persons in December.
The odds of another rate cut from the Fed were higher before the report’s release. Investors.com said the odds slipped to 3% for another cut on Jan. 29. Some potential labor market challenges related to the Fed delaying could include:
As we move into 2025, the labor market shows signs of resilience and rebalancing. Despite substantial job gains in key sectors like healthcare, challenges remain for industries sensitive to economic shifts. Employers must adapt to evolving dynamics to address hiring challenges, including supply constraints.
