2026 Labor Market Predictions
2026 Labor Market Predictions
2026 is poised to see a gradual recovery, but the primary challenge is shifting from demand weakness to structural labor supply constraints
Demographic shifts—aging workers, discouraged prime-aged workers, and reduced immigration—and technological advancements will uncover challenges and opportunities across sectors
Skills, flexibility, and transparency are redefining the employment contract and will be essential for employers competing for talent
2025 has shaped up to be quite a unique year for the labor market. Job growth slowed to a halt, workers became frozen in place, and the labor force shrank. As we look ahead to 2026, the question on everyone’s mind is: when will the thaw begin?
Demographic headwinds lead to tight labor supply
The labor market is showing signs of gradual improvement in the fall of 2025, with job growth hitting the highest level since April in the September jobs report. However, downward revisions to previous months of data and unemployment outpacing job openings remind us that recovery remains fragile. Unemployment is rising, especially long term unemployment, as many face challenges finding work in this low-hire environment.
Underlying this sluggish recovery is a significant demographic headwind that will constrain the labor market throughout 2026 and beyond.
While the workforce is aging—the population aged 65-69 have seen their population nearly double (up 97.3%) and their labor force participation increase by over 8 percentage points in the last 20 years—the overall growth of the domestic workforce has been sluggish for decades. Limited growth for the domestic workforce has historically been supplemented with positive net immigration, allowing the labor market to stay afloat. But at the end of 2025, some troubling trends are emerging. Older workers are clinging to their roles and prolonging retirement, younger generations are disengaged, and immigration is falling, all leading towards a tight labor market in 2026. Despite the lapse in labor demand that fueled the low-hire environment in 2025, the more systemic challenge the labor market faces in 2026 is constrained supply.
As the US population overall ages, immigration has been the saving grace that has kept the labor market afloat, especially given the higher labor force participation rate for foreign born workers. But current immigration policy is reducing the foreign born workforce, and without domestic replacement, supply will remain constrained.
A gradual pick up in labor demand
To combat the sluggish pace of the labor market, the Federal Reserve began cutting rates as inflation started to ease towards the Fed’s target, hoping to incite more business activity and hiring down the line. While wage growth is still outpacing inflation—offering some reprieve to workers—tariff pressures still create uncertainty for businesses, with high costs eating into bottoms lines and possibly dampening consumer spending. These mixed economic pressures will set the stage for what we expect to come in 2026.
The prediction: Slow and steady will win the race. The 2026 labor market won’t snap back overnight – and that might be good news. Instead of the dramatic surge seen during the post-pandemic hiring boom—which led to subsequent years of headcount reductions—this year we'll likely see a more gradual pick up in hiring activity. The low-hire, low-fire environment that defined much of 2025 will persist into early 2026, but with a crucial difference: while demand will pick up gradually, it will soon run headfirst into a wall of constrained labor supply. Employers are preparing for growth, not just survival, but their growth plans are structurally limited by demographics.
Despite current stagnation, the majority (63%) of businesses plan to increase hiring in the next year, with an emphasis on entry-level roles. While this is a smaller share than in years past, macroeconomic conditions have placed major headwinds in place keeping many employers from making moves. As interest rate cuts work through the economy and businesses develop strategies to adapt to tariff pressures, there will be a slow release of the pent-up hiring demand with the future becoming a little clearer.
What this means: The demographic squeeze means employers must fundamentally rethink talent acquisition. Policy needs to be put in place to upskill and train the domestic workforce to address the growing skills gap. Job opportunities will expand gradually throughout 2026. Workers should position themselves now by developing in-demand skills and learning how to best promote those skills to employers. Employers who start adapting now will have a first-mover advantage in securing talent. The following five trends will separate the leaders from the laggards:
1. Wage growth will approach inflation growth
Wages have been outpacing inflation for the past two and a half years, but wage growth is stabilizing around 3.8% annually while inflation grows marginally. As these two lines converge, workers will feel more strain on their budgets as real wage growth falters.
Prediction: Wage growth will fall below inflation, leaving workers with gaps less in their wallets, especially as tariffs continue to bump prices. Employers can expect workers to be more pay sensitive in the year ahead, as ever dollar counts. As a result, pay transparency will be increasingly vital. Job seekers, many of whom are already operating with thin financial margins, will demand to know their compensation to ensure they can maintain affordability.
2. Skills based hiring will become the norm, not the exception, as workforce demographics shift
As more young Americans enter the workforce, the traditional approach to hiring, i.e. relying on education credentials, years of experience, and just a resume, is changing. Young workers, facing high costs of living and economic uncertainty, are increasingly bypassing traditional four-year colleges – and forward thinking employers are adapting to meet them where they are by prioritizing demonstrated skills over credentials.
ZipRecruiter’s marketplace data on millions of job postings shows most job postings do not explicitly mention college degrees, with 88.0% of entry-level jobs omitting degree requirements in the job description. As time goes on, more employers are on board with fewer explicit requirements. According to ZipRecruiter's recent survey of US employers, 27.3% have dropped degree requirements from at least some of their job postings in the past year. This trend will likely accelerate as more Americans say they’re losing faith in the value of a college degree.
The shift away from emphasizing a degree is putting skills-based hiring center stage. As businesses shift away from degree requirements, they're adopting new methods to evaluate talent. Nearly two in five employers (38.0%) are now using candidate skills assessments in their hiring process to gauge abilities earlier in the recruitment funnel. This approach allows employers to cast a wider net and capture top talent who may have bypassed traditional education paths – a smart move considering over 70% of recently hired workers have less than a Bachelor's degree, as of ZipRecruiter’s Q3 New Hires Survey.
Prediction: Skills-based hiring will become the norm, not the exception, as employers prioritize demonstrated abilities over educational credentials. Employers who embrace assessments and competency-based evaluations will gain access to broader, more diverse talent pools.
3. Healthcare faces a demographic squeeze
Healthcare has remained the strongest sector in the labor market across 2025. Of the roughly 610 thousand jobs added to the US economy in 2025 (through the latest BLS release for November data), around 65% were in the healthcare sector.
As the US population ages, there will be even more pressure on the healthcare sector. According to the Bureau of Labor Statistics (BLS), healthcare and social assistance will see the largest job growth and will be the fastest growing sector over the next decade (through 2034), with demand cited to come from the aging of the US population. Over the last 20 years (2003 to 2023, ACS), the US population over the age of 65 has increased by over 25 million people, increasing the reliance on the healthcare industry.
Key occupations, like healthcare support, are expected to see the fastest rise in job growth, according to the BLS. In ZipRecruiter’s marketplace data, we are already seeing an increase in job postings for roles like nursing (32.8% yearly growth between November 2024 and November 2025) and home health care (6.8%), which are vital to supporting an aging population.
While an aging population drives growing demand for healthcare services, the sector faces a looming challenge: recent policy-based budget cuts to key healthcare programs will reduce healthcare-related jobs within the next 10 years due to a lack of funding, creating tension between rising demand and constrained supply. On top of cuts to program budgets, recent policy changes could impact how the next generation of medical professionals are trained. Current proposals would significantly limit the funding opportunities for graduate loans for certain healthcare professions, including nursing. Losing access to financing for costly educational programs could narrow the path to becoming a medical professional, leaving out middle- and low-income households from having access to the necessary education to fill these in-demand roles. The fallout would lead not only to a shortage of medical staff overall, but would likely leave deep scars in rural and underserved communities as the scope of who can access medical training shrinks. This squeeze—where surging demand meets potential supply constraints—will define the healthcare labor market landscape in 2026 and beyond.
Prediction: Healthcare will experience a critical inflection point in 2026. Job seekers in nursing, home health care, and healthcare support roles will find abundant opportunities as demographic demand surges, but the industry's ability to scale its workforce will depend heavily on maintaining accessible pathways to medical education and training. Workers already in the field could see strong job security, but may face burnout as the supply is stressed.
4. AI will make workers more productive and mobile—lowering barriers to career shifts
As the overall US population has aged, so too has the workforce. Workers aged 65-69 have seen their labor force participation increase from 26.7% to 34.7% over the last 20 years – an 8 percentage point jump. And with the larger population of older Americans, this increase in labor force participation leads to a significant shift in the age dynamics of the labor force. In 2003, only 15.2% of the labor force was 65+, in 2023 that jumped to 21.5%. The reason behind older workers sticking around for longer than previous generations is a mixed effect of longer life-expectancy, causing many older Americans to stay in their careers and homes longer than generations past as life stages tend to become more prolonged, and the high cost of retirement leaving many with few options but to keep working. As more older workers linger past traditional retirement age, their relationship with workplace technology becomes critical, especially as workplace technology is changing at such a rapid pace.
AI is fundamentally reshaping not just what work gets done, but who can do it. Workers who embrace AI tools are upskilling faster, becoming more productive, and finding it easier to switch roles or industries—capabilities that were once limited to those with extensive training or formal credentials. AI is democratizing access to skills and knowledge, making career mobility more attainable for workers across all backgrounds and ages.
ZipRecruiter surveys reveal a striking paradox: older job seekers are more skeptical of AI's growing workplace influence, yet older new hires are the most likely demographic to use AI tools for daily tasks. This gap highlights a critical insight—workers are capable of fully utilizing AI tools to boost their productivity and capabilities, but those with skepticism may be missing out on opportunities. The barrier isn't ability; it's perception and access to early training.
The shift is already visible in the labor market. According to ZipRecruiter's recent Job Seeker Confidence Survey, job seekers who used AI in any capacity in their search were significantly more confident they would find a job within a month (33.6%) compared to those who didn't use AI (20.3%). AI is helping workers prepare better, present their skills more effectively, and access opportunities they might have previously overlooked. As AI tools become more sophisticated at helping workers learn new skills, draft professional materials, and navigate career transitions, the traditional barriers to switching roles—time, training, and credentials—are lowering.
This trend benefits both workers and employers. The majority of employers (51.6%) report that AI is creating new roles in their organizations, and demand for AI skills has accelerated. Workers who can blend AI proficiency with uniquely human skills—collaboration, innovation, and communication—will be the most successful in this new landscape.
Prediction: AI will accelerate career mobility by helping workers upskill faster and transition between roles more easily. Employers who proactively offer AI training—especially to older workers and those looking to change careers—will unlock vast pools of talent that competitors overlook. Companies that treat AI as a tool for workforce development, not just efficiency, will gain a competitive advantage in attracting and retaining adaptable workers with diverse experience.
Looking ahead
The 2026 labor market will be defined by demographic shifts, evolving worker expectations, and the continued integration of technology into every role. Employers who recognize these trends and adapt – by dropping unnecessary barriers, investing in worker development, offering genuine flexibility, and embracing transparency – will be best positioned to attract and retain talent in the year ahead.
Bonus: What’s on workers’ minds in 2026?
1. Workers will demand human connection in hiring
An early hurdle many job seekers face in the current labor market is the “job search black hole” causing a void in communication between employers and job seekers. In the recent ZipRecruiter Job Seeker Confidence Survey, job seekers report their top pain point is never hearing back from employers (40%). And nearly half (47.4%) report being ghosted during their current search—with 43.1% of those ghosted saying it happened after a formal first-round interview was already conducted.
This communication breakdown is happening precisely as AI takes on more of the hiring workload. As AI increasingly handles initial screening and candidate evaluation, the lack of human touchpoints is creating a paradox: technology that should streamline hiring is instead leaving candidates in the dark about where they stand. Workers will demand transparency about when they're interacting with AI versus humans, and more importantly, they'll expect AI to solve—not worsen—the ghosting problem.
Companies that use AI to eliminate communication gaps—like automated status updates that keep candidates informed throughout the process—will win talent. Job seekers have the best experiences when AI speeds up and automates administrative tasks like scheduling interviews (33.9% had positive experiences). But when AI replaces human judgment in areas like reviewing video interviews, satisfaction plummets, with less than a quarter (24.1%) reporting positive experiences. Those using AI to further dehumanize hiring by cutting out communication entirely will face backlash from job seekers who are already frustrated.
Prediction: Companies that transparently communicate their AI usage and use automation to improve—not eliminate—candidate communication will gain a competitive edge. The employers who win top talent in 2026 will be those who use AI to keep candidates informed, not in the dark.
2. Flexibility becomes the new office perk
Technology hasn't just changed what tools workers use—it's fundamentally reshaped where and how they work. The pandemic-era shift to remote work proved that many jobs could be done effectively from anywhere, leaving a lasting impact on worker expectations even as offices reopened and return to office mandates continue to roll out. While remote work postings have declined from their pandemic peaks and the vast majority of jobs are now in-person, the genie is out of the bottle: workers have experienced a different way of working and aren't willing to simply return to pre-2020 norms.
While the vast majority of job postings don’t explicitly state they have remote options, still 64.3% of recent job seekers say they would prefer or demand a fully remote position for their next role. As employers and workers face off on the new working norms, workers are not willing to negotiate on one principle that came into the spotlight in the post-pandemic workplace: flexibility. Flexibility in their next role ranks number two for the most important factors for current job seekers. And those who have recently accepted new roles take it one step further - with some new hires even accepting lower pay in exchange for increased flexibility.
And employers are feeling the pressure to provide a more flexible workplace. In our recent Employer Survey, nearly 3 in 10 (29.4%) of employers said they had candidates reject an offer because they lacked schedule flexibility. As more businesses lose top talent to inflexibility, the competitive advantage will shift to those who embrace new work arrangements rather than resist them.
Prediction: As hiring activity picks up, hybrid arrangements and flexible scheduling will increasingly become expected offerings rather than premium perks. Employers who build flexibility into their workplace culture will have an edge in attracting quality candidates.
3. Pay transparency becomes table stakes
As workers face economic uncertainty, they're focusing on what they can control – applying only to jobs with salaries that meet their expectations. Salary transparency has emerged as a major concern in recent surveys, with a significant majority (70.9%) of job seekers stating that listing pay information is very important or essential to their decision to apply. According to ZipRecruiter’s marketplace data, postings in November with salary information received 77.9% more clicks from job seekers than job postings without salary information.
Most employers agree: 67.2% say sharing salary information upfront helps them find quality candidates. With 14 states already enforcing (or planning to enforce) pay transparency laws and 10 more with bills in the works, more job postings will comply with regulations and give job seekers the information they demand.
Prediction: Pay transparency will shift from a competitive advantage to a baseline expectation, with employers who hide salary information losing out on top candidates.