Scenario in the US is not as rosy as Wall Street thinks, says employment expert

Despite all the volatility that 2025 faced, things ended up relatively well: the S&P 500 stock index rose more than 17%, inflation did not spike despite a barrage of tariffs, and the unemployment rate remained relatively stable.

As a result, analysts and investors in general are feeling optimistic about 2026 — after all, the U.S. economy’s performance has exceeded expectations since the pandemic, so why not take a positive stance in the face of massive fiscal stimulus?

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Well, beneath this relatively robust macroeconomic picture, cracks are beginning to appear. These tremors are already being felt; just look at the Fed’s decision to cut the key rate despite arguments that under normal circumstances there would be no specific reason to do so.

Markets expected the cut based on the employment scenario, which has been showing some signs of weakness in what Fed Chairman Jerome Powell called a “low hiring, low firing” economy.

This weakness appears set to become permanent by 2026, according to Nela Richardson, chief economist at HR and employment data firm ADP.

ADP’s view of the economy has gained prominence this year, in part because of the government shutdown, which prevented the release of public payroll data. Into this vacuum came data from ADP, which shares information about employment in the private sector.

Unlike his economist peers on Wall Street, Richardson tells Fortune: “We’re tracking changes in real time — it’s as high-frequency as payroll data gets, and we haven’t seen that rosy picture for 2026 in the data. I think when people point to a better job market next year, they’re highlighting some macroeconomic things, whereas we’re looking at this very granular private employment data set.”

“They highlight maybe some rate cuts; they highlight some advantages on the fiscal policy side; and they probably highlight some gains with AI and investment paying off — and they’re certainly adding some clarity in terms of trade policy and resolving some of the macro issues. These are all fantastic attributes, but it takes longer for them to reach the small trader.”

Richardson points to his company’s most recent jobs report: U.S. private employment fell by 32,000 jobs in November, led by weakness at smaller companies.

Companies with one to 19 employees eliminated 46 thousand positions, while those with 20 to 49 employees cut 74 thousand. In contrast, companies with more than 500 employees added 39,000 workers.

“Very small companies represent a large share of employment, but they make small moves, and they are all moving in the same direction,” Richardson added.

“It could be something as simple as not hiring two teenagers at the bakery or giving up that delivery driver at a certain time of year. That’s not a big, mass layoff; it’s not replacing a worker here or there, and those changes add up. If you’re making these micro moves, micro decisions for small family businesses, those macroeconomic drivers are less likely to influence your patterns.”

A rapidly changing situation

In the past, a good work ethic and perseverance were enough to secure a first step on the career ladder. By 2025, that will no longer be the case — just ask the business leaders at the top of some of the largest corporations in the United States.

And while it’s true that Gen Z faces a completely different job market than their parents, the rules of the game are evolving so quickly that anyone entering the market from one year to the next will already encounter a different set of obstacles — making the outlook for 2026 even more complex.

These changes didn’t happen in a vacuum, Richardson says, but are more the result of the convergence of trends over the past five years.

The so-called Great Renunciation and the advancement of hybrid work are among the main ones. Hybrid work, for example, caused the field of competition to expand rapidly, as hiring managers were no longer restricted to a certain geography.

Likewise, “the Great Renunciation meant that people were able to impose their own terms,” Richardson added. “That meant hybrid working, higher salaries and bonuses, all kinds of promotions happened during this period. Why leave?”

These factors mean that the rules of the game change all the time for those entering the market: “It’s not even from generation to generation anymore,” says Richardson. “It’s your older brother or sister who graduated three or four years ago — and the job market is already different compared to theirs.”

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