Author: Andrew Berger-Gross
Welcome to the January 2026 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division (LEAD) of the NC Department of Commerce.
In this edition of NC Economy Watch, we examine labor market data released during and after the federal government shutdown. Despite a partial data blackout, these indicators demonstrate that North Carolina’s labor market has continued to progress along the same path it has in recent years. Although layoffs remain relatively uncommon, a slowdown in hiring has made it increasingly difficult to find a new job. As we enter 2026, we find ourselves staring down the fifth year of a prolonged labor market slowdown.
Hiring Continues to Weaken as North Carolina Approaches Fifth Consecutive Year of Labor Market Slowdown
What’s up with the labor market? This was a difficult question to answer during the fall of 2025 as a record-long government shutdown disrupted the federal statistical system, depriving us of many of the high-quality economic statistics we usually rely on. While the shutdown left us in the dark about many aspects of the economy, North Carolina’s unemployment insurance system continued to generate data revealing how our labor market held up during this uncertain time.
Many workers file an unemployment insurance (UI) claim when they lose their job, making initial UI claims a useful proxy for job losses in the broader labor market. Weekly UI claims reports have shown that layoff activity in North Carolina remained subdued throughout the shutdown [Figure 1]. This low level of layoffs persisted after the shutdown ended; during the week of December 20, only 3,375 North Carolina workers submitted an initial claim for UI, in line with the pre-COVID average of 3,247 and only a small fraction of the 172,145 who filed an initial claim at the height of the COVID-19 recession.
Figure 1
We can rest assured that, despite the headwinds our economy has faced this past year, there are few signs of the kind of mass layoffs that typically characterize an economic recession. At the same time, although relatively few workers have lost their jobs, those who have experienced a layoff are having a hard time finding a new job. Data from the NC Common Follow-up System show that, during the most recent period we have available, only 72% of UI claimants in North Carolina were re-employed within a year after losing their job [Figure 2]. Re-employment rates have been declining for the past several years and have now fallen to 2014 levels, representing the most difficult job-finding environment in a decade (excluding the COVID-19 recession).
Figure 2
More economic indicators have started to trickle out since the federal government reopened, including the closely followed Quarterly Census of Employment and Wages (QCEW). QCEW data aren’t as timely as some other indicators (the data are normally released at a five-to-seven-month lag), but they are the most detailed and accurate measure of employment available at the state and local level, so they’re worth waiting for.
Unfortunately, recently released figures from QCEW point to an extended slowdown in hiring statewide. Over-the-year job growth rates have slowed to a near-standstill, declining from a 5.0% gain in February 2022 to a paltry 0.6% gain in June 2025 [Figure 3]. In many parts of the state, this slowdown has descended into an outright downturn: 10 out of North Carolina’s 15 metro areas, and 50 out of North Carolina’s 100 counties, had fewer jobs in June 2025 than they did a year before.
Figure 3
Overall, the data released during and after the federal government shutdown depict a labor market that is similar in many respects to what we’ve been reporting for the past several years. Most employers are reluctant to let go of the workers they have, but few are enthusiastic about hiring new workers, leading to slower rates of job growth and more difficult job-finding conditions for dislocated workers as well as new jobseekers (like recent college graduates) who are struggling to land a foothold on the career ladder.
The labor market peaked in North Carolina and nationwide in early 2022. Since then, we’ve seen declines in wage growth, job openings, hires, and voluntary quits, all of which point to deteriorating labor market conditions for workers. As we enter 2026, we find ourselves staring down the fifth year of a prolonged labor market slowdown, arguably the longest slowdown we’ve ever experienced, and certainly the longest slowdown we’ve seen outside of an economic recession.
What’s next for the labor market? Many companies report that they intend to maintain the size of their teams or let go of workers in 2026, with relatively few announcing major hiring plans in the year to come. At the same time, there are reasons to believe that economic growth could accelerate in 2026, and it’s possible that a growing economy could increase pressure on businesses to add to their headcounts. The potential outcomes for this year range from a best-case scenario of labor market recovery to a worst-case scenario of mass layoffs. Or maybe the labor market will tread water, holding at its current weakened state without spiraling into an outright recession.
Whatever the future brings, stay tuned to NC Economy Watch as we continue to assess the incoming data to get a better sense of where the labor market is headed and what it all means for jobseekers, employers, and the workforce professionals who serve them.
For inquiries and requests, please contact:
Meihui Bodane, Assistant Secretary for Policy, Research and Strategy
NC Department of Commerce, Labor & Economic Analysis Division (LEAD)