Long-term unemployment becomes entrenched as US hiring cools

Long-term unemployment has shifted from a cyclical hiccup to a more persistent feature of the U.S. labor market. Roughly 1.8 million Americans have been jobless for six months or longer — about one in four of the unemployed — even while the headline unemployment rate remains near 4.3%. That divergence reflects weaker hiring rather than a spike in separations.

Hiring momentum cooled sharply in 2025: the economy added just 181,000 jobs for the year, while employers disclosed more than 108,435 planned layoffs in January. Outplacement trackers show January also recorded only 5,306 planned hires, the lowest count since that series began, and employers announced roughly 1.2 million job-cut notifications across 2025 — a cumulative pullback that has throttled opportunities for jobseekers.

Early-career opportunities have been particularly squeezed: entry-level listings have fallen about 35% versus early 2023, and the typical opening now attracts roughly 242 applicants. That intensity lengthens recruitment cycles, raises selection thresholds and pushes many applicants to accept lower wages when they finally land roles.

Policy and demographic shifts are amplifying these dynamics. Tighter immigration enforcement and higher sponsorship costs have reduced the supply of foreign-born workers and the consumer demand they support in some local markets, weakening incentives for employers to expand payrolls. Industries that rely heavily on immigrant labor — from agriculture to certain manufacturing niches — are reporting persistent shortages and production disruptions, which in turn encourages firms to accelerate automation and AI investments as a hedge.

Corporate behavior has also changed: many firms have adopted a “low-hire, low-fire” posture that preserves payroll stability but blocks entrants and lateral movers. Labor economists and indicators warn this posture can mask micro-level slack even as headline metrics look stable; Claudia Sahm’s granular employment signal, for example, sits below conventional recession thresholds and underscores a hiring shortfall rather than mass layoffs.

Worker sentiment studies add another layer: surveys indicate many employees are staying in unsatisfying positions because external options are scarce, reducing job-to-job churn that typically helps less experienced workers move up. The net effect is narrower mobility, slower reallocation of talent, and growing mismatch between open roles and applicants’ experience.

For individuals, long searches translate into immediate income loss and longer-term scarring: research shows rehired workers often accept pay cuts — commonly in the 5%–15% range — and prolonged unemployment can erode skills and mental health. To cope, many turn to gig work, relocation, or exhaust benefits, which compounds financial strain.

Employers face trade-offs. Conserving headcount and tightening role requirements can cut near-term costs but risks underinvesting in talent pipelines and losing qualified hires to competitors that streamline recruitment. Overreliance on automated screening may exacerbate the problem by filtering out suitable but nontraditional candidates.

Policy responses will matter for whether prolonged joblessness unwinds. Targeted measures — such as calibrated hiring incentives, retraining programs, immigration channels aligned with sectoral needs, and support for regional labor markets hit hardest — are more likely to restore entry paths than blunt demand stimulus alone. Without such interventions, the combination of demographic shifts, policy-driven labor constraints and faster automation may entrench long-term unemployment and slow wage growth.

In short, the labor market’s headline stability masks a deeper reconfiguration: weaker hiring and structural pressures are creating pockets of persistent unemployment that will shape career trajectories and regional economies unless employers and policymakers adjust hiring practices and policy frameworks.