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By conventional big-picture measures, the US labor market looks pretty good. However, the mood about the US labor market feels undeniably grim. Is this a “vibe-session,” based on little more than gloomy moods? Or can we dig a little deeper into the data and find some reasons for concern?

Let’s start with the big-picture good news. The US unemployment rate at 4.4% has edged up a bit from the remarkably low levels that prevailed in the late days of the pandemic, but remains quite low by the standards of the last half century–for example, less than half the level at the worst of the Great Recession.
 

Overall real wages have been edging up. The figure shows inflation-adjusted median wages for wage and salary workers. The median means that half of workers are above this level and half below–so while a wage increase that only affects the upper-wage workers would cause the average to rise, it will not cause the median wage to rise.
 

The rise in real wages applies across the distribution of skill levels. This figure may look messy, but it’s message is straightforward. Divide up the labor force according to level of education. Focus again on workers over age 25, and the median wage. In the figure, the level of wages for each group has been set equal to 100 in the year 2000. Thus, the graph shows what education groups have received the highest increase in (nominal) wages over this time.

The orange line at the top shows that the biggest wage gains have gone to workers with less than a high school education. The purple line shows that the lowest wage gains have gone to those with “some college or associate degree.” The other three education categories–high school degree only, bachelor’s degree only, and bachelor’s degree and above–have seen median wages grow at about the same rate in the last 25 years.
 

Of course, these big picture labor market measures don’t mention everything. But they surely don’t suggest that the US labor market is in dire straits. So what is causing the feelings of gloom? Jeff Horwich of the Minneapolis Federal Reserve takes a deeper look at the labor market data in “Off the sidelines and into the low-hire economy: More Americans are diving back into the job hunt despite `ugliest’ labor market in years” (December 15, 2025). He points to several factors worth pondering.

First, the “hiring rate” is measured by the number of new hires divided by the number of current employees. Even as the unemployment rate nudges up, the hiring rate is sagging.
 

Second, the proportion of the unemployed who are long-term unemployed–that is, unemployed for 27 weeks or more–is on the rise. In the aftermath of the Great Recession, the long-run unemployment rae remained stubborly high for years. It spiked again after the pandemic recession. But in the last few years, it’s on the rise again.
 

Third, labor market economists divide up adults into three groups: 1) those who are employed, 2) those who are in the labor force in the sense that they are actively looking for jobs but are unemployed, and 3) those who are out of the labor force, not looking for a job, and thus not counted as unemployed. Horwich points out that people who were counted as “out of the labor force” are reentering the labor force (red line). The common pattern is that people move from out-of-the-labor-force straight into a job. But the number of people moving from out of the labor force into actively looking for a job but ending up unemployed is edging up (blue line).
 

Fourth, of those who remain out of the labor force in the sense that they are not actively searching for a job, a rising number say that they “want a job now.” As Horwich points out, about two million people each month are entering the labor force and looking for a job, but not finding one (the figure above), but another six million of those who are out of the labor force would like a job, with that number rising.
 

Fifth, as the share of those previously out of the labor force drops, the “labor force participation rate” (which counts both the employed and those actively looking for jobs but currently unemployed) is rising. This figure shows the proportion for “prime age workers” the 25-54 age bracket, but it’s rising for most age and demographic groups other than the elderly.
 

Finally, when existing workers perceive that the labor market is strong, they are more likely to quit an existing job to take another one. But when existing workers are more worried about finding an alternative job, the quit rate falls. For example, the quit rate plummets during the Great Recession from 2008-2010. After some big oscillations related to the pandemic and its aftermath (including changes in work-from-home rules), the quit rate has been dropping for several years now.
 

An overall picture begins to emerge from this data. A rising number of people are reentering the labor market seeking jobs–some after being absent from the labor market for several years–but hiring is down. Among the unemployed, long-run unemployment is on the rise. Existing workers don’t perceive that alternative jobs are plentiful, and quit rates have falled. These issues aren’t apparent in the basic unemployment or median wage data, but they are nonetheless very real.

Observing the labor market data doesn’t reveal how to interpret it. Changes in immigration patterns may have some effect, but it’s not obvious how fewer immigrants looking for jobs would lead to lower hiring rates, fewer quits, or greater long-run unemployment. I’ve heard it speculated that employers perceive a rise in the uncertainty of the economic environment, with different reasons applying to different groups: for some firms, it’s the seesaw pattern of tariffs threatened, coming, and going; for others, the rapid advance and potential disruption of artificial intelligence technologies; and for still others in certain areas, the ongoing push for substantially higher minimum wages. When employers are doubt, they become more likely to default toward not hiring, at least not immediately.

As Horwich points out, burdens of consumer and mortgage debt are on the rise, in part because of higher interest rates, which can make getting a job feel even more urgent. In addition, I’ve heard it speculated that finding a job in the modern online labor market can feel forbiddingly dicey. You look at a website, fill out lots of online forms, maybe get an form letter notification back, or even a few interviews, but the sense is that every position that is posted online gets many, many applicants. Your chance of standing out from the crowd of other applicants feels small, unless you know someone or have a personal connection. To me, some of the grimness in the current labor market is about a justified and all-too-real feeling that navigating through the modern labor market feels like a long run up an icy hill–with the possibility of no reward waiting at the top.

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