As the year draws to a close, there are some patterns we can point to in the labor market: The post-COVID hiring bonanza decidedly came to an end this year, more people found themselves out of work, and it got tougher to find a new job.

The big question now is: what happens next year?

The labor market this year has cooled. The unemployment rate went from 4% to 4.6%, a four-year high. Wages — adjusted for inflation — actually stopped increasing in recent months.

There are multiple factors at play here, according to Michael Reid, senior U.S. economist at RBC Capital Markets.

“The first is immigration policy that's really slowing the supply of new workers who are coming into the U.S.,” he said, meaning a company looking to hire might not even be able to.

The second is baby boomers retiring. Younger workers may be replacing them, but that doesn’t count as new jobs created.

Meanwhile, the big economic story of the year — higher tariffs — has left many employers reluctant to expand their workforces. There’s a term that’s sprung up for this dynamic: low fire, low hire.

“We should expect that to be more the norm going forward,” said Mitchell Barnes, a labor markets economist at The Conference Board. “We have really been marking our calendars for the first half of 2026 for really the full kind of suite of the tariff impacts to really roll through to businesses and, therefore, the labor market.”

Two bright spots, economists say, are that tax cuts Washington enacted this year will take effect next year — likely prompting consumers and businesses to spend more — and the fact that the Federal Reserve is also expected to keep cutting interest rates.

JPMorgan predicts all of this could boost hiring in the second half of next year. Economist Jeffrey Roach of LPL Financial agrees.

“When we work through the year, we'll see businesses move past this tariff uncertainty, perhaps take advantage of some of the tax incentives for capital expenditures,” he said.

As in, business could grow. When they do, they tend to hire. Usually.

There’s a big question mark about whether artificial intelligence is changing that dynamic, however, with companies looking to do more with fewer workers.

Office workers have seen little to no growth in their ranks, pointed out Preston Caldwell, senior U.S. economist at Morningstar.

“We may be seeing increasing impact of AI now, whether that's justified or not,” he said. “I think companies think they could do a little bit more with less. I expect that to continue in 2026.”

That’s especially the case for young, entry-level workers, who saw their unemployment rate this year skyrocket to more than 9%.

This all means that the labor market next year is expected to be much like the rest of the economy: growing — slowly — with gains that are unevenly distributed.