Jobless claims fell in final week of 2025. What does that mean for 2026?

The last federal economic data point of 2025 came out Wednesday morning, and it was a pretty encouraging one. Initial claims for unemployment benefits fell for the week ending Dec. 27, by 16,000, to 199,000. That’s well below what economists were expecting, and it’s the second-lowest reading we’ve seen in the last two years.

It could be telling us that the job market is stabilizing, and may be heading for a rebound in 2026. Or it could be statistical noise in a volatile month for economic stats.

December can be kind of messy when it comes to unemployment data, said Andrew Stettner, director of economy and jobs at The Century Foundation.

“It is always a tricky month to look at the week-to-week claims,” he said.

And this year, that could be especially true. Businesses may have shifted layoffs to earlier in the year to deal with tariffs, and seasonal trends could be skewing the numbers.

Over 2025 as a whole, unemployment claims have risen about 5%, Stettner said.

Frank Fiorille analyzes employment data at Paychex, a small-business payroll processor. He calls the current job market a “low-fire, low-hire environment.”

Small employers are now raising pay at well-under 3% a year. And workers are staying put rather than switching jobs, unlike a few years ago.

Back then, “people who were leaving for another job were getting really big pay raises. And that’s just not happening now,” Fiorille said.

As 2025 was drawing to a close, David Royal at Thrivent Financial said he sees a weakening employment picture.

In the delayed November jobs report that came out a couple weeks ago, he pointed out, not only did overall unemployment rise to a four-year high: “The biggest percentage of additional unemployed came in people unemployed five weeks or less. So that implies this is a more recent phenomenon, probably the result of a lot of the layoffs we’ve seen in the news,” he said.

One bright spot is that employers have been increasing hours for existing employees, said Paychex’s Frank Fiorille.

“That’s the first lever that businesses will pull, that they’ll start asking folks to work more hours. That could be sort of a precursor to more hiring coming down the pike,” he said.

On the other hand, Andrew Stettner at The Century Foundation sees more headwinds in the forecast for 2026: federal spending cuts in health care, the immigration crackdown, and uncertainty around tariffs. 

Plus, he worries about the quality of economic growth, which remains strong with a caveat.

“A lot of the spending is at the very high end of the job market, a lot of GDP growth is in the AI and the construction around that,” he said.

He said economic growth that’s overly concentrated is unlikely to support broad-based job growth.