Labor Market on the Mend, Lower Rates on the Fence?

Firms pulled back sharply on hiring last year as policy uncertainty and higher input costs – driven largely by tariffs – forced a reassessment of risk. Nonfarm payroll growth averaged just 9,700 per month in 2025, down dramatically from 121,600 in 2024. That slowdown reflected a familiar corporate response: When uncertainty rises, labor – the largest and most flexible cost – becomes the primary adjustment mechanism. Rather than expand headcount, firms chose to wait.