Employers are adopting a cautious and strategic approach to hiring in 2026, giving careful consideration to economic conditions, which are giving no clear indication of where things are headed, according to those who monitor employment trends.
Emerging technologies such as artificial intelligence are adding to the uncertainty.
“The labor market remains steady,” said Jennifer Mega, managing partner of the East Providence-based staffing firm Mega Professionals LLC. But, she added, “It’s not booming.”
Indeed, concerns linger about a potential economic slowdown impacting job availability, observers say, which could lead to more applicants for employers to choose from. But that doesn’t necessarily mean the end of staffing problems for companies that have struggled to find help.
“A slower economy might temporarily increase the number of available workers, but it doesn’t actually solve the staffing shortage most businesses face,” Mega said. “The real issue is a skills gap – employers still struggle to find candidates with the right experience, even when more people are looking for work.”
And AI isn’t making long-term labor decisions.
“Factors such as how AI can reshape their workforce strategy are a big topic right now,” she said. “Companies are choosing to be more selective with hiring while they figure out where human talent adds the most value.”
Is it any wonder why employers are proceeding cautiously?
In November, J.P. Morgan Asset Management analysts projected that the national economy may experience “uncomfortably slow growth” in the early months of 2026, with prospects for a potential rebound later in the year, contingent on shifts in U.S. monetary policy, such as on tariffs.
Rhode Island’s economic signals in the third quarter of 2025 were mixed, according to the Rhode Island Key Performance Indicators Quarterly Briefing, released by The Center for Global and Regional Economic Studies at Bryant University and the Rhode Island Public Expenditure Council.
“Rhode Island’s economy showed a welcome easing in the unemployment rate and modest gains in resident employment in Q3,” said Michael DiBiase, CEO and president of RIPEC. “These are encouraging signs and point to a degree of stability in the state’s economy. However, continued weakness in labor force participation, the decline in Rhode Island-based jobs, and stronger regional and national performance in unemployment and GDP indicate that Rhode Island’s trajectory still merits close watch. Policymakers should remain focused on strengthening the state’s long-term competitiveness in the face of ongoing economic headwinds.”
Global economic research firm Moody’s Analytics projected that Rhode Island may enter a “recession adjacent” phase, suggesting that the state may avoid the technical definition of a recession – two or more consecutive quarters of negative economic growth – but job growth will be minimal, and unemployment could rise above 5%.
Federal Reserve Chair Jerome Powell echoed this sentiment in a speech at the Greater Providence Chamber of Commerce in September, characterizing the current environment as a “low-fire, low-hire” mode, where businesses approach payroll changes with caution due to ongoing economic policy uncertainties.
In the wake of the COVID-19 pandemic, the U.S. labor market was well below 4% unemployment, what is generally considered full employment. But by November of last year, the jobless rate had edged up to 4.6% nationally – the highest since 2021 – and 4.3% in Rhode Island.
This rise was partly attributed to an influx of “reentrants” into the workforce, individuals returning to work as pandemic-era savings diminish amid ongoing living cost increases.
Nevertheless, the latest report from the R.I. Department of Labor and Training showed unemployment insurance claims for first-time filers averaged 789 in November, up from 737 a month earlier. Claims were up an average of 82 a week from November 2024. Over the past three months, the Rhode Island economy has lost 400 jobs, or an average loss of more than 100 jobs per month.
Leonard Lardaro, a University of Rhode Island economist, noted the challenging landscape, classifying the state’s economy as experiencing a recession with “painfully weak” indicators, although certain sectors, such as retail, have exhibited resilience.
Powell said the interplay of a softening labor market with inflationary pressures makes for a complex economic environment. National inflation rates increased by 2.9% in August compared with the same month a year ago, while gross domestic product growth slowed to around 1.5% in the first half of 2025, compared with roughly 2.5% growth the year before.
Mega said that to protect against a fluctuating economy and rising unemployment rates, the state’s emphasis should be on workforce development and strategic investments, which will be crucial in setting the state’s economic trajectory.
There are clear opportunities for job growth through workforce enhancements and targeted investments, allowing the state to position itself favorably in a competitive labor market, she said.
“Long term, workforce development and training matter far more than economic slowdowns,” she said.
