(NewsNation) — After a year of cooling, 2026 will reveal whether the job market is stabilizing or weakening further.
It’s a question dividing policymakers as they try to interpret what Fed Chair Jerome Powell recently called a “complicated, unusual” economic situation.
Job growth is averaging just 40,000 a month since April, Powell said Wednesday, but he thinks that figure may be overstated by “about 60,000” — suggesting the economy has actually been losing 20,000 jobs a month.
The unemployment rate rose to 4.4% in September, marking the third consecutive uptick and the highest level since October 2021. Meanwhile, the rise of AI has many white-collar workers worried that this year’s job losses are only the beginning.
“It’s a labor market that seems to have significant downside risks,” Powell told reporters this week.
Still, the most dire labor market predictions haven’t materialized. Unemployment has gradually ticked up — not spiked — and remains relatively low by historic standards. Jobless claims haven’t surged and some research suggests AI hasn’t been a major force in layoffs.
Here’s what the labor market could look like in 2026.
Unemployment rises but doesn’t surge
Several forecasts see the unemployment rate ticking up to around 4.5% in 2026 — only a slight increase from the latest reading.
J.P. Morgan expects the first half of the year to deliver “uncomfortably slow growth” in the labor market, with unemployment peaking at 4.5% in early 2026. The firm points to a combination of slowing labor supply — driven by tighter immigration policy and an aging population — and softer growth in jobs that are more exposed to AI, a trend that has been especially pronounced among younger workers.
A recent survey of forecasters by the Federal Reserve Bank of Philadelphia also projects a 4.5% unemployment rate in 2026.
The Federal Reserve’s projections show unemployment holding near its current level next year before falling to 4.2% in 2027.
Next week’s November jobs report will provide an important signal to end the year. It was delayed due to the government shutdown, leaving economists with less information than usual.
Powell noted that the shutdown likely weighed on economic activity this quarter but said those effects should be “mostly offset by higher growth next quarter.”
Private jobs data from payroll processor ADP pointed to a pullback in November, particularly among small businesses.
Is 2026 the start of the AI job apocalypse?
So far, reports of AI-driven job losses have been anecdotal, with limited evidence of a broader shift in the labor market.
“It’s not a big part of the story yet,” Powell told reporters this week. “We don’t know whether it will be.”
Career platform Glassdoor expects that pattern to continue in 2026, saying it anticipates scattered cases but limited data on AI’s impacts, rather than a “major upheaval in the labor market.”
Vanguard made a similar point in its 2026 economic outlook, arguing that fears of widespread AI-driven job losses are running ahead of reality.
“While AI may have started to change our workflows, its role in explaining the recent slowdown in job growth is overstated,” the investment giant said.
According to Challenger, Gray & Christmas, companies have announced plans to cut nearly 55,000 jobs this year, with AI as the reason — about 5% of the 1.1 million layoffs announced overall.
But AI’s impact is almost certain to grow in the years ahead as adoption accelerates and companies find more ways to automate routine work.
Last year, Brookings found more than 30% of all workers could see at least 50% of their occupation’s tasks disrupted by generative AI.
Which jobs have a bright future?
The 2025 labor market was often described as a “low-hire, low-fire” environment, but the picture varies dramatically by sector.
Health care has dominated this year, representing nearly 50% of all job growth in 2025 through August, according to Indeed’s Hiring Lab. Health care job postings ended October more than 20% above pre-pandemic levels.
An aging population is expected to keep demand for health care workers high in the years ahead. Labor Department projections show roles including nurse practitioners and physician assistants among the fastest-growing jobs over the next decade.
If hiring remains strong in health care, job openings in 2026 could remain “relatively high” and help keep overall unemployment from rising sharply, Indeed’s Hiring Lab noted in its 2026 forecast.
But health care’s strength could also be masking vulnerabilities in other sectors where conditions have worsened. Tech job postings on Indeed are about one-third lower than they were in early 2020 and postings in retail and hospitality are 7% below pre-pandemic levels.
Official data show manufacturing employment has fallen since the start of the year, and jobs in professional and business services have also declined, particularly in administrative roles.
Roles like cashiers, office clerks, customer service representatives and bank tellers are expected to see some of the largest declines over the next decade, according to Labor Department projections.