Employment Services NAICS 5613

Jan 12, 2026 - US Labor Market Slowed Significantly in 2025

• The US labor market slowed sharply in 2025, bringing the post-pandemic hiring boom to a clear end. Employers added just 584,000 jobs over the year - about 49,000 per month - marking the weakest job growth in more than two decades outside of recessions. Hiring cooled as companies grappled with tariffs, assessed how AI might boost productivity with fewer workers, and watched employees hold onto existing jobs amid layoff concerns. Government payrolls saw the steepest losses, falling by 274,000 positions. Nearly all net job gains came from health services, with leisure and hospitality also expanding, while employment declined in manufacturing, transportation and warehousing, and temporary help. Even so, unemployment edged up to only 4.4%, in part because immigration restrictions sharply reduced the size of the labor force. Younger workers and Black workers faced more pronounced increases in unemployment, while wage growth cooled slightly but continued to outpace inflation.
• Nineteen states raised minimum wages in January 2026, lifting pay for an estimated 8.3 million US workers and expanding pay floors exceeding $15 an hour. For employment services firms, the changes heighten demand for multistate compliance guidance, pay benchmarking, workforce planning and compensation redesign as clients adjust to higher labor costs and local variations. Thirty states set minimum wages above the federal $7.25 baseline, with Washington state reaching $17.13 and Hawaii posting the largest jump to $16. Voter-backed increases in Nebraska and Missouri pushed both to $15. According to the Economic Policy Institute, more workers now live in $15-plus states than in those tied to $7.25. The shifts, driven by cost-of-living pressures and broad public support, intensify debates over employment effects and pricing, underscoring the need for scenario modeling, turnover management and automation strategies - core offerings for HR advisers and staffing providers navigating tighter labor markets.

• A Massachusetts Institute of Technology (MIT) study finds that artificial intelligence (AI) is already capable of performing work equal to 11.7% of the US labor market, meaning today’s AI systems could automate tasks now done by roughly one in nine workers. The study uses a new tool called the Iceberg Index, developed with Oak Ridge National Laboratory, to simulate how 151 million US workers’ skills overlap with thousands of existing AI tools and to measure “technical exposure,” instead of specific predictions of job cuts. When AI capabilities in administrative, financial, and professional services are included, the total exposed wage value reaches about $1.2 trillion. The research highlights that visible AI adoption in tech makes up only 2.2% of that exposure, suggesting much of AI’s potential impact lies beneath the surface. Researchers say the tool can help policymakers tailor reskilling and workforce planning at local levels.
• The US Court of Appeals for the Eleventh Circuit ruled that a staffing agency was not required to compensate workers for time spent waiting for and riding employer-provided transportation from a labor hall to jobsites, nor for time spent picking up or returning optional tools. The court held these activities were not “integral and indispensable” to the employees’ principal job duties and therefore fell outside compensable work time under the Portal-to-Portal Act, which limits what counts as paid time under the Fair Labor Standards Act. The court also allowed the employer to deduct transportation costs because the transit primarily benefited workers rather than the business. While binding only in Alabama, Florida, and Georgia, the decision reinforces a narrower view of compensable pre- and post-shift activities and could influence employers nationwide to reassess pay practices for travel, waiting time, and incidental tasks, potentially reducing wage-and-hour litigation exposure.