The news: Retailers announced 92,989 job cuts last year, a dramatic 123% jump from 2024, per Challenger, Gray, & Christmas. The layoffs reflect the confluence of pressures merchants faced during 2025, including tariff uncertainty, shifting consumer spending patterns, and rising costs.

That weakness carried into the holidays. Challenger, Gray & Christmas reported last fall that retail holiday hiring in the final three months of the year was the weakest since 2009.

Zooming out: Retail is not alone. Employers announced more than 1.21 million job cuts last year, the highest level since 2020 and a 58% jump from 2024.

Heading into 2026, the labor market looks increasingly fragile.

• ADP reported that private employers added 41,000 jobs in December, a rebound from November’s 29,000-job decline but below the 48,000 jobs economists expected. The gains were concentrated in services, while goods-producing industries shed 3,000 jobs, driven by a 5,000-job drop in manufacturing.
• Consumers have taken note. Nearly two-thirds (63%) expect unemployment to keep rising this year, per the University of Michigan.

Our take: The labor market—and, more importantly, consumers’ perceptions of it—plays an outsize role in spending behavior. Consumers’ current unease is already visible at the grocery store: Albertsons recently reported that even higher-income shoppers are becoming more price- and value-conscious. Until labor conditions meaningfully improve, that caution is likely to persist across retail categories.

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