US Job Market Outlook 2026: Looming Risks and Analyst Projections

US Job Market Outlook 2026: Are Risks Mounting?

In the absence of robust official data from the U.S. Bureau of Labor Statistics, analysts are currently assessing how quickly the U.S. job market is deteriorating. While available data from private and alternative sources suggests the job market hasn't weakened significantly yet, economists are concerned about the potential for rising unemployment as a key risk to the U.S. economy in 2026.

For the market right now, “ignorance is bliss.” Buoyed by the end of the government shutdown and improved global trade prospects, investors are pushing markets higher again and lowering expectations for volatility.

Investor confidence has not yet been affected by concerns about the labor market. After all, there is no concrete evidence yet that employment data is weakening.

However, RSM chief economist Joe Brusuelas wrote in a note to clients last Friday: “The ‘labor hoarding’ that has existed in the U.S. job market over the last few years has come to an end.”

Fortune reported that tech talent in hot sectors like tech and AI had been “talent-penned” by companies during COVID-19 to prevent competitors from snapping them up. But this safety net seems to be eroding as the AI skills picture becomes clearer.

Brusuelas explained: “As firms allocate vast sums of capital to technologies designed to boost productivity, one should anticipate that firms of all sizes, but especially larger ones, are going to prepare to cut jobs. With firms now shifting their focus to efficiency and enhanced productivity, we expect to see an increase in layoffs, resulting in a higher unemployment rate.” He added that 2026 is likely to be a year of “low hiring, high firing.”

Brusuelas’s view is echoed by Goldman Sachs chief U.S. economist David Mericle. Mericle noted in a weekly economic update released overnight that the financial giant’s layoff tracker is currently at levels higher than those seen at the start of the pandemic in 2019.

Goldman Sachs’s tracker is based on a series of other indicators that the bank compiles: layoffs, labor slack, and job growth. The layoff tracker shows that the base forecast is for the unemployment rate to increase by 0.2 percentage points to 4.5% in the next six months, with a 20% to 25% probability of an increase of 0.5 percentage points or more.

Mericle added: “Our job growth tracker stalled over the summer, bounced to 85,000 in September, and then slowed to 50,000 in October. Given the impact of government deferral resignation plans, we expect the official nonfarm payroll number to decline by 50,000 in October.”

He said that the possibility of jobless growth is a “key risk for the 2026 outlook.” Brusuelas also cautioned that the Federal Reserve doesn't have the capacity to stem the labor market slowdown by cutting interest rates. He argues that the Fed doesn't have the tools to balance issues like AI applications or immigration policies, as these factors create structural, not cyclical, unemployment.