EXCLUSIVE INDUSTRY RESEARCH & DATA
This issue’s research-focused article summarizes the crisis of opportunity within the labor market and digs into what forces will influence the industry’s growth in 2026. As the industry’s research and data leader, ASA reports on timely industry data in every issue of Staffing Success.
If one could assign a final grade, the economy in 2025 was decidedly mediocre. Not good, but not terrible. Great in the sense that the economy avoided a significant downturn, but not so good because it nonetheless suffered due to numerous headwinds.
The industry itself follows a similar narrative: Staffing’s recession seems to have ended last year as it finally recorded year-over-year growth in terms of employment in the latter half of 2025, according to the ASA Staffing Index. On the flipside, the industry was certainly limited in a year defined by a cooling labor market with historically low churn.
As an industry that relies on turnover to help fuel demand, this continues to represent a major challenge. But with the page turning on an eventful—maybe even tumultuous—year, what lessons can staffing companies discern to help them navigate the swirling headwinds and tailwinds and chart a course for growth in 2026?
Confronting a Crisis of Opportunity
An already-established trend since the end of the Great Resignation, declining labor churn continued in 2025 as multiple pressures related to high employment costs and economic uncertainty depressed employers’ willingness to hire and workers’ willingness to quit.
While hiring and attrition declined in tandem, the hiring rate used to at least sit above the total rate of job separations. This meant that, despite the lower churn, more workers were gaining jobs than losing them—but now both hiring and separations are equal, and turnover is at a record low.
According to the U.S. Bureau of Labor Statistics, as of October 2025 the nonfarm hiring rate was 3.2%, meaning that same proportion of the total workforce entered a new job that month (below the 25-year average of 3.7%), while 1.8% of the workforce quit their jobs (lowest quit rate since May 2020) and 1.2% were laid off (quits plus layoffs together total 3.2%).
Much attention had been put on concerns about rising layoffs leading to higher unemployment, but that clearly didn’t materialize. While the unemployment rate did edge up from 4.0% to 4.4% in 2025, the layoffs rate itself is not especially high or low by historical standards (the average layoffs rate since 2001 is 1.4%)—but it should be noted that layoffs don’t need to be especially high for unemployment to rise. As long as hiring continues to remain subdued (and it’s at its lowest rate since 2011), unemployment can still increase gradually as those who exit the workforce find it more difficult to re-enter.
While declining hiring and quits has led to lower churn, the good news is that this has led to unemployment being relatively steady, despite some uptick—as job creation is low, but job losses are kept in balance.
The break-even rate of job creation to support economic activity has fallen from 129,000 per month in January 2025 to just 29,000 in September, according to the Kansas City Federal Reserve Bank. With decreasing immigration, the supply of workers has contracted alongside a reduction in labor demand. With steady unemployment, this means despite significant cooling, the labor market is still roughly in balance in terms of supply and demand. While positive for overall economic stability, it has fostered a crisis of opportunity, excluding a slowly growing pool of job seekers on the sidelines.
For those employed, this job market isn’t so bad as they can hunker down, but those on the sidelines are increasingly being left behind. The ratio of long-term unemployment is elevated compared to prepandemic rates—up from 20.0% in January 2020 to 24.3% as of November 2025. As job seekers struggle amid this crisis of opportunity, not only is it a struggle for frustrated job seekers but a challenge for staffing as well (as an industry that relies on healthy labor churn). Despite these challenges in the past year, there are still tailwinds that can help boost the economy and the industry this year.
Tailwinds for 2026
There are roughly three main factors blowing the economy forward: artificial intelligence (AI) investment, fiscal stimulus, and consumer spending. While the total impact of productivity gains from AI adoption is still unclear, the outsized investment in this technology certainly stimulated the economy—accounting for 30% of total gross domestic product (GDP) growth in the second quarter of 2025, according to calculations from Nationwide Economics. Unless this explosion in AI investment truly is a bubble, it will likely continue to stimulate growth in 2026, even as the productivity gains from it take time to materialize in the data. However, given how important AI investment has become to economic growth, should AI enthusiasm slow down the economy would likewise feel the brake.
Government stimulus will be another tailwind helping the economy, as tax cuts have been extended and scheduled spending cuts postponed until after 2026 by the One, Big, Beautiful Bill Act. According to estimates from JPMorgan, tax refunds could add between 0.5% and 0.8% to GDP growth in the first quarter of 2026. This expansionary fiscal stimulus will help keep labor demand steady this year, and as interest rates continue to descend this will provide the economy with a stable platform to build up from—avoiding the negative shocks that would’ve accompanied immediate spending cuts or stricter tax policy. As lower rates make hiring more financially viable for employers, hiring should see a modest boost from its current historical low—especially in rate-sensitive sectors such as construction and manufacturing.
Despite faltering sentiment among workers and consumers, consumer spending itself has held steady. The Consumer Sentiment Index from the University of Michigan fell from 71.7 in January 2025 to 52.9 in December, but despite this collapse personal consumption continues to grow year-to-year, increasing 5.4% in November 2025 compared to the 10-year average of 5.5%. Consumption is arguably the most important economic metric, contributing more than two-thirds to total GDP, and thus reliable consumer demand has kept the economy afloat through the tumultuous past year. While this may be true, the fact remains that perspectives are souring on the economy.
With inflation continuing to pinch the finances of many middle- and lower-income households, it’s unsurprising that more people are seeking out opportunities to supplement their income. The ASA Workforce Monitor recorded an eight-point increase in the likelihood of U.S. adults seeking a side hustle from 2024 to 2025, up to a total likely of 64% (with 23% very likely). While higher turnover from better sentiment would be a stronger tailwind, low sentiment is pushing many to seek out alternative employment—expanding the labor pool the industry can draw upon.
Key Tailwinds to Watch
- Fiscal and monetary stimulus will help keep labor demand stable.
- Massive private investment in AI provides some forward momentum.
- Alternative employment may become more popular as workers seek to supplement incomes.
Given the selective nature of job growth and the enduring effects of low churn, it’s clear then that staffing firms must be strategic—identifying the winners while staying agile themselves amid persistent cost pressures and a labor market increasingly defined by exclusivity.
Headwinds for 2026
Barring a recession, the rate of inflation will likely remain above target in 2026, hitting workers and businesses alike with cost pressures while forcing the Federal Reserve to very carefully consider the pace at which it lowers interest rates. The Fed has reported that it no longer believes current policy is in restrictive territory and, as of December 2025, anticipates only one rate cut in 2026.
While employment costs have decelerated from record highs, this trend has reversed slightly as total compensation costs ticked up in 2025 to 3.5% in the third quarter. Profit margins will likely continue to be crunched as cost growth remains above the prepandemic baseline of 2.8% growth in the first quarter of 2020.
The impacts of tariffs on economic activity have moderated as trade policy uncertainty has diminished, but tariffs remain a headwind that will push up inflation by 0.9% (assuming full passthrough to consumers) and slow GDP growth by 0.4% in 2026, according to estimates from the Yale Budget Lab.
With slower economic growth due to tariffs likely in 2026, similar impacts from falling immigration and the extended government shutdown have led to lost economic activity, as well. Immigration policies are expected to reduce GDP growth by 0.7% in 2026, according to the National Foundation for American Policy, and $11 billion in GDP was destroyed during the 43-day government shutdown, according to the Congressional Budget Office. This means a smaller pie and less opportunity.
While tightening labor supply could lead to employers needing staffing services to source workers, that is only true if demand remains stable (though we know labor demand is also cooling).
While the job market is roughly in balance in terms of labor supply and demand (both are falling; lower break-even level), the unbalanced job growth is likely to remain relatively concentrated in certain sectors—especially health care, which accounted for 74% of total private job growth year-to-year in November 2025, according to BLS. Such concentration exacerbates the crisis of opportunity gripping the job market, restricting the staffing industry’s growth. The crisis of opportunity will extend into 2026; the question will be how much it will alleviate.
The possibility of another government shutdown is not out of the question, either, and it could lead to more uncertainty and lost economic activity. The broader problem of economic and policy uncertainty from 2025 is still a drag on employment, even if it has moderated.
