Layoffs are getting better. The white-collar job market is not

The latest layoff data looks like good news at first. According to the outplacement firm Challenger, Gray & Christmas, U.S. companies announced fewer job cuts in December and laid out plans for more hiring. At a cursory glance, that data could appear set to calm widespread labor-market dread.

But the apparent optimism could also be hiding a familiar late-cycle problem — what companies say they'll do and what they actually do are two different things.

Challenger tracks announced layoffs and hiring plans, which are forward-looking signals that tend to look better at the end of the year. It's the time when companies usually close their books, reset budgets, and hit pause on restructurings. For all these reasons, December is historically a quiet month for layoff announcements — even during economic downturns — because many employers often delay hard decisions until January. Meanwhile, hiring plans may reflect wishful thinking more than actual execution.

Actual payroll data tells a tougher story

ADP's December report showed that while private employment ticked up overall, job losses remained significant, and more tellingly, remain concentrated in business services and IT — sectors tied to corporate investment, tech, and white-collar work. Manufacturing payrolls kept shrinking, too.

What hiring gains did show up? They were concentrated in education, healthcare, and leisure — areas driven by more inelastic demand than economic expansion.

Other indicators show the same pattern

The Institute for Supply Management reported that service-sector employment improved towards year end, while manufacturing headcount contracted for the eleventh straight month. In other words, it shows stabilization in defensive sectors, as well as ongoing cuts in cyclical and capital-intensive ones.

For workers in white-collar fields like tech, consulting, and media, it's an especially weird moment — fewer layoff headlines, but still difficult conditions when it comes to landing a new job. The larger companies may be done cutting for the moment, but they're not ready to rehire aggressively in the parts of the economy that tend to drive long-term productivity and wage growth.

AI contributing to white-collar decline

As Bill Adams, chief economist at Comerica Bank, noted yesterday, job growth in 2025 faced numerous headwinds — from tariffs to DOGE-related cuts to federal employment, as well as persistent weakness in construction and housing. AI also weighed on hiring, Adams said, pointing to a 47,000 decline in information-sector jobs over the course of the year as productivity gains reduced the need for additional workers. Even in industries where AI’s benefits are slower to materialize, he added, companies’ decision to prioritize investment in new technology over traditional expansion has tended to dampen labor demand.

For policymakers and investors, the takeaway is clearer. The labor market is slowing, if unevenly, and in ways that headline data can obscure rather than clarify. The worst job-shedding might be over, but the recovery everyone's waiting for hasn't shown up where it matters most.