The U.S. economy is still booming. Layoffs haven’t spiked. The stock market continues to climb. And yet, when a fresh batch of labor market data landed Tuesday, one of the country’s most respected economists said it made her stomach drop.
“It’s gut-wrenching,” Diane Swonk, chief economist at KPMG, told Fortune. “We’re growing, but we can’t generate jobs.”
“Rock bottom” hiring
Two releases—the November Job Openings and Labor Turnover Survey (JOLTS) from the U.S. Bureau of Labor Statistics and December’s private-payroll report from ADP—tell the same story from different vantage points. Hiring demand is cooling fast, and worker movement has frozen, yet employers are also still reluctant to cut staff. The result is a labor market stuck in a strange, late-cycle equilibrium that Swonk said looks nothing like past expansions.
Start with JOLTS, the Job Openings and Labor Turnover Survey, which, as official government data, holds more water with economists than the private ADP data. Job openings fell to about 7.1 million in November, down sharply from October and nearly 900,000 lower than a year earlier. The “quit rate,” which serves as the ultimate barometer for worker confidence and the ability to climb the career ladder, remained stagnant at 2.0% in November (Swonk said she was shocked by this number in particular). Economists haven’t seen this level of inertia since January 2014, a period when the country was still clawing its way out of the Great Recession.
In a healthy economy, people quit for better-paying roles, driving wage growth for everyone. Today, however, workers are “clinging on” to the jobs they have out of sheer fear, Swonk said. This lack of movement has created a kind of mobility trap where the natural path to a middle-class raise has essentially vanished. While ADP data shows that “job-changers” saw pay growth accelerate to 6.6% in December, Swonk argues this is a statistical distortion. This “switching premium” is increasingly reserved for a tiny elite of specialized AI talent, while the average worker finds that the premium for job-hopping has evaporated, causing attrition rates to plummet and companies to freeze hiring.
This “frozen” state is further evidenced by what ZipRecruiter Chief Economist Nicole Bachaud wrote in a note was a “series low” in “other separations,” which economists usually interpret to mean retirements and transfers. These fell to just 232,000 in November. “Older workers are increasingly remaining in the labor market for longer,” Bachaud wrote, a trend driven both by rising life expectancy and “increased pressure on retirement savings due to affordability concerns.” It suggests potential economic hardship, as workers feel compelled to extend their careers. In other words, many boomers can’t enjoy their golden years in this economy.
People aren’t retiring, they aren’t moving, and they aren’t quitting. The labor market has (un)settled into an odd disequilibrium where hiring is at “rock-bottom” levels, as Samuel Tombs, chief economist from Pantheon Macroeconomics, wrote, but layoffs also remain low because companies are hoarding the workers they already have.
Economists say the explanation lies in a mix of post-pandemic caution and lingering labor scarcity. After years of companies on the backfoot during the “Great Resignation,” many appear determined not to let go of the people they have, even as they quietly stop adding new ones.
“We had overstaffing in the wake of the pandemic, so I see it as a bit of a hangover from the surge [of hiring] as the economy reopened and everything went crazy,” Swonk said.
The widening wage gap
Fresh data from the Bank of America Institute provides a vivid look at how this stagnation is hurting different income groups differently, showing a “pronounced gap” in the wage growth experience. In December, higher-income households saw after-tax wage growth of 3.0%, while middle-income growth dropped to just 1.5%—its lowest point since May 2024. For lower-income households, the situation is even tighter at 1.1%.
With inflation still persistent, this means middle- and lower-income families are effectively seeing negative real wage growth. They are working in an economy that is expanding on the charts, but feeling poorer with every paycheck. This “K-shaped” divergence is fueling a spending divide where affluent households keep the economy “booming” through high-end travel and services, while the bottom 80% struggle to make ends meet.
This economic fracturing is taking a physical toll on certain parts of the country. The December ADP report revealed what, if the data is accurate, would be a massive localized crisis: the West region shed 61,000 jobs in a single month. This collapse was driven by the tech and professional sectors in the Pacific sub-region, which lost 59,000 positions. Swonk points to this as evidence of “jobless growth,” where firms are leveraging efficiency to “do more with less”. While some analysts from Oxford Economics argue the AI-driven shakeup is still “patchy,” Swonk notes that companies are aggressively cutting the white-collar support roles and middle-management positions that were once the bedrock of the middle class.
Whether those cuts reflect genuine productivity gains from AI—or simply a belated correction after post-pandemic overhiring—is still unclear, Swonk said.
The fragile one-legged stool and a faint silver lining
Perhaps most concerning for experts is how narrow the base of our economic growth has become. For much of late 2025, the labor market was propped up by a single sector: Education and Health Services, which added 39,000 jobs in December. Swonk refers to this as a “one-legged stool” that is finally starting to buckle, especially as childcare subsidies freeze and the public sector broadly faces margin compression from tariffs.
Amidst this worrisome news, analysts are searching for a floor. BoFA notes that while the market is in a “low-hire, low-fire” mode, a slight rebound in their payroll estimate in December may suggest that “the worst of the slowdown is behind us.” Their report suggests it is possible that the labor market slowdown has “run its course” and that the deceleration in lower-income wage growth has finally leveled out.
However, the outlook for the rest of 2026 remains subdued. Jeffrey Roach, Chief Economist for LPL Financial, wrote that he expects monthly private payroll growth to stabilize at a meager 50,000 for most of the year. He said he was optimistic that private payroll growth may have “bottomed out,” but his chart spoke volumes about the precipitous decline in hiring.
While a temporary “sugar high” from tax refunds and minimum wage bumps in 19 states might provide a short-term lift to spending, Swonk said the relief will be short-lived. The economy, as it is, is incredibly vulnerable to a market correction.
“If you have anything that is a negative shock that hits the top 20%, you take down consumer spending pretty quickly,” Swonk said. “And that’s two-thirds of the economy.”
