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If it feels like the job market has stalled out lately, that’s because it has.
Hiring in America has dropped precipitously, and we aren't talking about a single culprit here. This isn't just about inflation or interest rates; it’s a perfect storm of economic factors that has left the labor market in what EY-Parthenon chief economist Gregory Daco calls a "deep freeze."
So, what is actually going on? It turns out, there isn't just one reason hiring has slowed—there are a lot of them.
1. The "Sticky" Workforce (The Feedback Loop)
Here is a strange irony: The reason companies aren't hiring might be that you aren't quitting.
Typically, the bulk of hiring in any given month is simply replacing people who left. But right now, workers are staying put. The "quits rate" (people leaving jobs voluntarily) sat at just 2% in December, well below the 2.3% average we saw back in 2019.
This creates a weird adverse feedback loop:
* People don’t want to quit because hiring feels slow and risky.
* Because nobody is quitting, companies don’t need to hire replacements.
* Because companies aren't hiring, people feel even less secure about quitting.
### 2. The Usual Suspects: Tariffs and Rates
Beyond the psychology of the workforce, there are hard economic barriers making employers hesitant:
* **Trade Policy:** Uncertainty over tariff policy has made it nearly impossible for many companies to plan ahead. For small businesses especially, rising costs due to tariffs mean there’s no budget for new employees.
* **Borrowing Costs:** High short-term interest rates are squeezing smaller firms that rely on credit cards for financing.
* **Tech Hangover:** Tech companies went on a massive hiring spree post-pandemic. Now, they are still dealing with the "overhang" of those workers and have slammed the brakes on new recruitment.
### 3. The Unemployment Paradox
Here is the head-scratcher: Usually, when hiring is this low, the unemployment rate skyrockets. But currently, unemployment is hovering around 4.4%.
Why the disconnect? Because employers aren't firing people, either. Layoffs remain relatively low, reflecting an economy that is "chugging along" without a massive shock to demand. We are seeing glacial growth—adding very few jobs—but not shedding them either.
### 4. There Simply Aren’t as Many People to Hire
This is a massive structural shift. Between President Trump’s crackdown on immigration and an aging population, the flow of new entrants into the workforce has slowed to a trickle.
According to research from the Brookings Institution and the American Enterprise Institute, potential monthly employment growth—the number of jobs needed just to keep unemployment stable—has plummeted. It fell to about 35,000 in the second half of 2025, compared to 140,000 in 2024.
As economist Stan Veuger points out, immigrants aren't just workers; they are consumers. Fewer immigrants means less demand for goods and services, which in turn means less demand for workers.
### 5. Is AI to Blame?
It’s the question everyone is asking. Sorting out AI’s impact is tough, but there are some early signs.
* **The Timing:** Some pointed to the stall in tech hiring starting in late 2022 (when ChatGPT launched) as a smoking gun. However, that coincided with a wave of pandemic-correction layoffs, making it hard to isolate AI as the sole cause.
* **The Data:** Stanford economists found that young people in AI-exposed fields (like software development) are seeing hurt prospects.
* **The Fear:** Even if AI hasn't taken millions of jobs yet, the *promise* of it might be. Companies may be pausing hiring for roles they suspect AI could handle soon. This could explain why recent college graduates are seeing a rise in unemployment.
Consumers are nervous. Surveys from the New York Fed and the University of Michigan show people believe jobs are "hard to find" and expect unemployment to rise. When workers feel the market is fragile, they hunker down.
Until that cycle breaks—or until policy uncertainties resolve—the US hiring freeze looks set to continue.