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By Hugh Cameron
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For the first half of 2025, the labor market was, in the words of Federal Reserve Chair Jerome Powell, a “low hire, low fire” environment, with minimal job cut announcements preventing sluggish openings from translating into a more universally negative employment situation.
But the final months of the year saw many of America’s largest employers roll out waves of large-scale layoffs, pushing total job cuts to levels rarely seen this century outside of Covid and the financial crisis.
Outlooks for next year vary. Some anticipate normalization after several choppy, post-pandemic years and the potential for elevated hires and relatively low unemployment propped up by the expanding health care sector. But others worry that economic uncertainties and the specter of artificial intelligence could disrupt hiring patterns and see layoffs stay at—or exceed—the elevated levels of late 2025.
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Which Sectors Could See Layoffs in 2026?
“Ordinarily this would be a difficult question,” said economist Daniel Hamermesh, one which is “even more difficult right now. We haven’t gotten a clue since August.”
The government shutdown and the administration’s subsequent decision to delay or suspend several critical economic reports have prevented analysts and policymakers from receiving an accurate and timely view of the labor market in late 2025.
But Hamermesh, emeritus professor of economics at the University of Texas at Austin, said that tariffs will inevitably continue to cast a long shadow over jobs in 2026, likening their effects to the 1973 oil crisis, which raised both costs and unemployment in the U.S.
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“If you tell me which sectors are most affected by tariffs, I’ll tell you which sectors are going to be hit,” he said, pointing to retail and services—the sectors directly downstream of increasingly fragile consumer spending.
“Every sector is at risk for layoffs in 2026,” said Aaron Sojourner, senior researcher at the W.E. Upjohn Institute for Employment Research. “Unemployment is rising and job growth is slowing broadly across sectors. Wage growth has decelerated versus a year ago.”
Sojourner said that, like 2025, next year will see labor demand weakened by tariffs and declining public investments in health care, as well as the loss of immigrant consumers thanks to President Donald Trump’s crackdown.
The Year of AI Job Displacement?
Aside from specific policy effects, economist Desmond Lachman told Newsweek there are two overarching reasons to be concerned about next year's labor market.
“The first is the likely overall state of the U.S. economy,” said Lachman, senior fellow at the American Enterprise Institute. “The second is the increased pace at which the application of artificial intelligence is likely to displace white collar workers.”
Fears over a technology-driven job displacement have grown this year, and AI has already been linked to many of this year’s mass layoff announcements. Amazon cited AI's “transformative” potential while informing employees it would be eliminating around 14,000 corporate roles, and Salesforce's CEO said he had been able to cut the company's headcount by 4,000 in 2025 as chatbots took on the tasks previously handled by its customer service agents.
Eric Woodard, CEO at the career coaching firm Win At Work, told Newsweek that “repetitive cognitive work” will continue to be the hardest hit by AI in 2026.
“Roles built on predictable, rules-based knowledge work—accounting, basic legal drafting, contract review, compliance monitoring, junior software development, financial modeling, paralegal summarization—are directly in the crosshairs,” he said. “Current-generation AI now handles these workflows quickly and accurately, and companies are waking up to how many steps no longer require human involvement.”
He added that physical work is temporarily safe, because “robotics adoption in the U.S. has moved slower than AI adoption,” but that the gap is “shrinking quickly,” and that 2027 may be the year when manufacturing and construction begin to experience what is now sweeping across white collar professions.
And beyond roles that can be supplanted by the technology outright, Lachman said that should long-harbored fears over the AI bubble bursting come true, this could trigger an economic crisis that leaves few jobs in its wake.
“If we do get a sharp stock market correction and a decline in the pace of AI investment, we could get an overall cooling in the labor market,” he said. “Such a cooling labor market would be especially felt in the construction and manufacturing sectors.”
Will Layoffs Rise Compared to 2025?
According to the latest report from outplacement firm Challenger, Gray & Christmas, the 71,321 job cuts announced by U.S.-based employers in November pushed 2025’s total to nearly 1.2 million, up 54 percent compared to last year and the highest figure outside of Covid since the Great Recession.
While experts believe employment, like most things, will hinge on how the U.S. navigates trade tensions, technological shifts and unforeseen international events, the economy’s current trajectory suggests 2026 will largely mirror the patterns witnessed this year.
Hamermesh believes the “brouhaha” over AI-related job cuts is “grossly overblown,” but given the current economic climate sees no reason to believe the labor market will be on a stronger footing in 2026.
“It’s not going to improve, not at all,” he told Newsweek.
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