If one had looked at the median forecast for real gross domestic product (GDP) growth from economists in early 2025 (2.2%) and then went into hibernation for a year, waking up only to see the final result, that individual may have thought that nothing eventful happened during the year. In reality, 2025 was anything but uneventful, marked by significant economic policy changes and the uncertainty that followed. Through everything that happened during the year, however, the economy remained resilient. Real GDP growth was close to early forecasts from economists: 2.0% growth from the fourth quarter of the previous year, a small deceleration from the 2.4% pace from the end of 2023 to the end of 2024.
While overall economic growth remained resilient, the labor market told a different story. The United States experienced the slowest pace of job growth outside of a recession since 2003, with a net employment gain of 116,000 jobs for the entire year. And job growth was a one-sector story. Health care and social assistance added 686,100 jobs over the course of the year, meaning that employment in all other industry groups combined
declined by over 500,000 jobs for the year, with the sharpest declines seen in government employment.
But the lack of overall growth is not the only story of the labor market. In sharp juxtaposition to the slowdown in hiring, other labor market indicators continue to look strong. The unemployment and layoff rates remain historically low while wage growth remains elevated over pre-pandemic averages. In this brief, we will take a deeper dive into the labor market of 2025, assessing how these trends impact workers compensation and the outlook for the economy in 2026.
Key Themes and Takeaways
- Economic growth was resilient in 2025; the labor market was not.
- Hiring has slowed materially but still elevated wage growth has supported payroll growth for workers compensation premium.
- The breadth of the hiring slowdown, elevated wages, fewer low-tenured workers, and rising geopolitical uncertainty are four key trends that we will be watching for the economy and workers compensation in 2026.
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Quarterly Economics Briefing to learn more.
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