By year-end 2025, it had become clear that California’s job market was idling in neutral, with little to no change overall in the number of jobs statewide. In a time of uncertainty and pessimism about our economic future, neutral is better than a downturn. However, neutral is not great news for Californians looking for work, nor is it helpful for the state’s businesses who would like to grow.

Across the state, there were just 0.1% more jobs in December than in January 2025 (an increase of 10,000 non-farm jobs, based on preliminary estimates). Month by month throughout the year we saw more of the same, with only very small additions or subtractions to the number of jobs statewide.  A similar pattern occurred nationally, with 0.3% more jobs over 2025 (a total of 473,000 added).

The demand for workers across the economy

Overall, California employers are hiring at a lower rate than we’ve seen in much of the post-COVID period. The share of job openings (compared to jobs overall) has been virtually unchanged for two years.

Across industries, hiring is by far strongest in health care (adding 130,000 jobs in 2025), followed by government and “other services” (which includes businesses like auto repair and dry cleaning, as well as civic organizations). These are the only three sectors in positive job growth territory for the year.

At the other extreme, the biggest shrinkage in jobs has occurred in four sectors: manufacturing, administrative services, information, and professional services (the latter two are home to tech and Hollywood firms); all of these sectors have shrunk by 2% or more in the past year.

As with the statewide picture, job growth is positive but small across the state’s major regions—with one exception. Over 2025, the number of jobs in the Bay Area fell by 0.4% (15,300), driven particularly by larger job losses in the tech sector (information and professional services).

Californians looking for work

The state’s labor force grew by 241,000 people between the end of 2024 and December 2025. At the same time, by the end of 2025 there were slightly more new labor force entrants looking for work than finding employment—meaning that unemployment has increased as well. However, that increase was by 20,000 people, a very small number compared to the size of the state’s entire labor force (over 19.9 million). Thus, the unemployment rate was virtually unchanged (at 5.5%) by the end of both 2025 and 2024.

A growing labor force is good news. It signals that despite pessimism about the economy more Californians are opting into the workforce. This makes it less likely that the sector job loss we’re observing is because employers can’t find workers.  However, there are worrisome long-term trends about the supply of workers in our state and a perennial challenge of matching the needs of employers and the skills of Californians available to work.

Indeed, California’s 5.5% unemployment rate does not reflect job-market gray areas: situations in which workers have stopped looking for a job or where they’ve opted for part-time work because that’s all they can find. Altogether, about 10% of Californians are either in one of those grey areas or are unemployed, much higher than the headline rate of unemployment (our calculations are based on data from September to December 2025).

The current job market is crowded: there were more unemployed Californians per job opening in 2025 than since roughly the mid-2010s (except during the worst part of the pandemic). That rate has been virtually unchanged for the last two years. In other words, job seekers’ circumstances haven’t gotten much worse lately but also haven’t improved.

In sum

A neutral job market is better than some of the alternatives. However, in light of increasing cost pressures, the status quo may feel like falling behind for some Californians. And for workers and businesses in sectors or regions struggling more than others, the challenges compound.

What can California do to move the job market out of neutral? While the macroeconomy is driven largely by forces beyond the control of state policy, California leaders can consider a range of actions. Prioritizing programs that grow jobs, reducing barriers to new businesses, and aligning education and skills training for today—and tomorrow—can all help spur improvement for workers and employers alike.