Staffing Stats

Labor Market Snapshot: Cautious Signals, Real Reasons for Optimism

As 2025 came to a close, the contract staffing market sent mixed but telling signals. While short-term indicators showed some softening, broader employment data points to resilience and potential opportunity as we move into 2026. For employers and staffing partners alike, understanding these trends is key to planning for the year ahead.

Staffing Index: Short-Term Dip, Longer-Term Strength

Layoff Activity: Encouraging Signs at Year-End

Layoff data also offered a positive note to close the year. According to Challenger, Gray & Christmas, December recorded the fewest announced layoff plans of any month in 2025.

“The year closed with the fewest announced layoff plans all year. While December is typically slow, this, coupled with higher hiring plans, is a positive sign after a year of high job-cutting plans,” said Andy Challenger, workplace expert and chief revenue officer at Challenger, Gray & Christmas.

This moderation in layoffs, combined with signs of renewed hiring intent, suggests companies may be moving from aggressive cost-cutting toward more balanced workforce planning.

Click here for the full 2025 Challenger Report

GDP Outlook: A Year of Crosscurrents

Looking ahead, The Conference Board projects a complex economic environment in 2026. Fiscal policy is expected to deliver mixed effects, with growth supported by accelerated depreciation and tax cuts, partially offset by reduced green investment and cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP).

Monetary policy will remain a wild card, depending heavily on the composition of the Federal Reserve under a new chair. Meanwhile, the midterm elections later in the year could prompt federal stimulus to address affordability concerns, creating upside risks to growth. At the same time, widespread hiring freezes and recent layoffs present downside risks, particularly if the labor market’s current low-churn equilibrium begins to shift.

Click here for The Conference Board’s full Forecast

Jobs Added: Modest Growth with Sector Divergence

The December ADP employment report underscored the uneven nature of job growth:

• Job Growth: +41,000 private sector jobs in December 2025
• Sector Gains: Education and Health Services, Leisure and Hospitality
• Sector Losses: Information, Manufacturing, and Professional and Business Services
• Company Size Trends: Small businesses showed signs of recovery, while large employers continued to scale back
• Pay Growth: Job-stayers saw annual pay growth of 4.4%, while job-changers experienced higher gains at 6.6%

These trends reinforce the value of flexible staffing models, particularly as growth concentrates in specific sectors and among smaller employers.

Temporary Help Penetration Rate: A Long-Term Shift

One of the most notable longer-term trends is the steady decline in the temporary help penetration rate. Historically, temp help has represented about 2% of total employment. However, that rate dropped below 2% in October 2022 and has continued to fall for more than three years.

According to the Bureau of Labor Statistics, the penetration rate declined to 1.59% in February 2025 and continued downward throughout the year, reaching a low of 1.54% in December. This sustained decline suggests structural changes in how employers are using contingent labor, even as economic uncertainty persists.

What It Means for 2026

Taken together, these data points suggest a labor market that is cautious but not collapsing. Staffing employment remains higher than a year ago, layoffs are moderating, and certain sectors continue to add jobs. At the same time, employers are clearly being selective, favoring flexibility, targeted hiring, and careful cost management.

For contract staffing and workforce solutions providers, 2026 is shaping up to be a year where adaptability, industry expertise, and strategic partnerships will matter more than ever. The signals may be mixed, but for those prepared to navigate change, opportunity remains firmly on the table.