Beyond Health Care: Has Labor Market Improvement Broadened in 2026

Beyond Health Care: Has Labor Market Improvement Broadened in 2026?

October 13, 2026

• Policy Hub: Macroblog
• Publication

Nonfarm payroll employment increased by just 29,000 in September. Monthly payroll changes, however, are volatile and often revised, so a single report might not reveal underlying labor market conditions. Looking through this volatility, payroll growth averaged 68,000 per month over the first nine months of 2026, a clear rebound from last year's weakness. If you recall, average monthly payroll growth slowed from 122,000 jobs in 2024 to just 10,000 in 2025. The slowdown was particularly pronounced in the second half of 2025, when payroll employment declined by an average of 8,000 jobs per month.

As was widely noted at the time, job growth in 2025 depended heavily on one sector-health care. Excluding that sector, payroll employment declined by an average of roughly 23,000 jobs per month over the year and 46,000 per month in the second half. Lower net immigration likely contributed to the slowdown, but labor demand also weakened. The average monthly job-opening rate fell from 4.7 percent in 2024 to 4.35 percent in the first half of 2025 and 4.2 percent in the second half, according to the Job Openings and Labor Turnover Survey (JOLTS), published by the US Bureau of Labor Statistics (BLS).

This raises a natural question: Has the improvement in labor market conditions in 2026 spread across industries, or has it remained concentrated in a few sectors, as in 2025? In this blog post, I show that the latest industry data point to a relatively broad but modest improvement.

Job growth broadens beyond health care

Figure 1(a) reports average monthly job gains by industry over the nine months ending in September 2026. The health care sector remained the largest contributor, adding an average of 28,700 jobs per month, slightly below its 2025 average of 32,000. More importantly, employment growth was no longer concentrated in that sector. Instead, job gains were broad-based: 10 of the 13 sectors added jobs, while only government, information, and financial activities recorded average monthly declines.

Across all industries, payroll employment increased by an average of 68,000 jobs per month. The health care sector accounted for about 42 percent of the gain over these nine months. Although that contribution remained substantial, it was less dominant than in 2025, when overall payroll employment would have declined without the gains in health care. Together, these data point to a broad rebound from the softness in 2025.

With slower population growth, partly reflecting lower immigration, the breakeven employment growth needed to keep the unemployment rate steady has also declined. Current estimates vary considerably: a Federal Reserve Board analysis places the 2026 breakeven pace at fewer than 10,000 jobs per month, while the Atlanta Fed's Jobs Calculator currently estimates roughly 68,000 under its default assumptions. Thus, although recent monthly job gains remained well below the averages of more than 100,000 a month in both 2023 and 2024, they were likely around or above the current breakeven pace.

Because monthly job gains are measured in levels, they partly reflect differences in industry size. To account for this, figure 1(b) reports the percentage change in each industry's employment from December 2025 to September 2026. Total payroll employment grew by 0.39 percent over this period. Six of the 10 expanding industries, including health care, grew faster than aggregate employment. Information was the worst-performing industry, with employment falling 3.6 percent, amounting to an average loss of 11,400 jobs per month.

Job-opening rates increased in most industries but only modestly

Next, I examine the job-opening rate, a measure of labor demand. Figure 2 reports changes in the trailing three-month average between December 2025 and August 2026, the latest month for which data are available. The aggregate rate increased from 4.13 percent to 4.33 percent over this period. The analysis covers 12 industries rather than 13 because JOLTS combines health care with social assistance. Among these 12 industries, eight industries recorded increases, and in six of them, the increase exceeded the aggregate rise of 0.20 percentage point. This pattern suggests that the improvement in labor demand was relatively broad. Its magnitude, however, remained modest: the August aggregate rate was well below the 2023 and 2024 averages of 5.60 percent and 4.70 percent, respectively.

It's also worth noting that industries with larger percentage increases in employment are not necessarily those with larger increases in job-opening rates. For example, financial activities recorded the largest rise in its job-opening rate despite experiencing a relatively large payroll loss. This divergence is not necessarily contradictory: payroll growth measures realized net employment changes, whereas the job-opening rate measures positions that remain unfilled. Employment can rise while openings decline as vacancies are filled, and openings can increase without immediate employment gains when hiring takes time. Rising vacancies alongside employment losses might also reflect restructuring within broad industries, with newly posted positions differing in occupation or required skills from the jobs being eliminated.

Labor market tightness changed little

Finally, I compare the number of job vacancies with the number of unemployed workers, resulting in a vacancy-to-unemployment ratio that is commonly used to measure labor market tightness. For the industry analysis, unemployed workers are classified according to the industry of their most recent job. Because industry-level unemployment data are not seasonally adjusted, for consistency I use non-seasonally adjusted vacancy data. To reduce the influence of seasonality, I compare trailing three-month averages ending in August 2025 and August 2026.

Figure 3 reports changes in this ratio by industry. It includes 11 industries because the official monthly Current Population Survey unemployment series from the BLS groups education with health care and social assistance. At the aggregate level, the trailing three-month average edged up from 0.93 to 0.98 vacancy per unemployed worker between August 2025 and August 2026. The ratio increased in six industries and declined in five. Most industry-level changes were modest, although the information sector recorded a notably larger decline. Taken together, the small aggregate increase and offsetting movements across industries indicate little overall change in labor market tightness.

Overall takeaways

So, has the labor market strengthened since the end of last year? Yes, but only modestly. Payroll employment increased in 10 of 13 industries, and job growth was less dependent on the health care sector than in 2025. Job-opening rates rose modestly in eight of 12 industries, while vacancies per unemployed worker changed little overall. Taken together, these indicators suggest that the weakening in labor market conditions observed in late 2025 has given way to a relatively broad but modest improvement.