Consumer Confidence Collapses, Layoffs Return, Gen Z's AI Skepticism

Why did consumer confidence collapse in January?

U.S. consumer confidence fell sharply in January to its lowest point since May 2014—dropping below even pandemic-era levels, according to The Conference Board. The Consumer Confidence Index declined 9.7 points to 84.5, down from 94.2 in December.

"Confidence collapsed in January, as consumer concerns about both the present situation and expectations for the future deepened," said Dana M. Peterson, Chief Economist at The Conference Board.

The outlook is especially concerning. The Expectations Index fell to 65.1—well below the 80-point threshold that typically signals a recession ahead. Only 15.6% of consumers expect business conditions to improve, down from 18.7% in December. Just 13.9% expect more jobs to be available, while 28.5% anticipate fewer jobs.

Workers are feeling the shift in real time: less than a quarter (23.9%) described jobs as "plentiful," down from 27.5% in December, while those describing jobs as "hard to get" increased to 20.8%.

How long is it taking Americans to find work?

Unemployed Americans are now spending more than 11 weeks searching for jobs—the longest average since 2021, according to the Financial Times. Long-term unemployment has reached a four-year high, with 1.9 million Americans currently looking for work for more than 27 weeks.

More than a quarter (26%) of the country's 7.5 million unemployed workers have been actively searching for over six months. The number of long-term unemployed grew by 26% in 2025 alone.

Is healthcare hiring finally slowing down?

Health care employment, which fueled much of last year's labor market growth, is now "losing steam," according to Axios. While the sector added an average of 34,000 jobs per month in 2025, that pace was well below 2024's monthly average of 56,000.

Several forces are converging: cuts to federal health programs, automation from AI advancements, and rising costs are all limiting how many new hires health systems can make. Neale Mahoney, a Stanford University economics professor, told Axios that "health care hiring has essentially returned to a pre-pandemic pattern of slower growth after a post-COVID surge."

Experts say health systems are now doing "more targeted hiring" rather than the broad-based growth seen in recent years.

Why are manufacturing jobs still declining despite tariffs?

Despite the Trump administration's tariffs—which have generated around $30 billion a month in revenue—the promised blue-collar jobs boom hasn't materialized, according to Reuters and The Washington Post.

U.S. manufacturing jobs declined in December, extending an eight-month losing streak that began last spring. Manufacturing lost 8,000 jobs in December alone, with factory employment dropping more than 70,000 since April.

"2025 should have been a good year for manufacturing employment, and that didn't happen," said Michael Hicks, Director of the Center for Business and Economic Research at Ball State University.

Economists say the tariffs have "hampered" manufacturing overall—protecting some U.S. manufacturers while increasing costs for many others. As Richmond Fed President Tom Barkin observed: "It is hard to find businesses outside of the AI ecosystem or healthcare that are talking about hiring."

Which companies are cutting jobs?

A number of prominent employers have announced or are planning layoffs, with over 100 U.S. employers filing legally mandated WARN notices about job cuts in 2026, according to WARN Tracker.

Amazon announced plans to lay off 16,000 corporate employees to "trim bureaucracy and free up money" for AI investments. UPS is cutting about 30,000 jobs this year after ending its Amazon partnership and planning to slash total operational hours by approximately 25 million. Citi continues cutting jobs as part of its plan to reduce headcount by 10% (20,000 employees), which the bank says could save up to $2.5 billion.

Washington Post is planning steep staff reductions, reportedly targeting its foreign desk and sports department. Pinterest is laying off less than 15% of its workforce as it "embraces artificial intelligence." Nike announced plans to eliminate 775 jobs, mostly at distribution centers in Tennessee and Mississippi. Tyson layoffs impacting nearly 5,000 workers at plants in Nebraska and Texas took effect in January.

Who's actually following return-to-office policies?

The return-to-office wars are mostly over, with structured hybrid policies now the norm, according to commercial real estate firm JLL. But a subset of valuable workers still aren't following the rules—because they can afford not to.

JLL's Workforce Preference Barometer identifies two groups: compliers and non-compliers. Workers who comply tend to be older, value stability over flexibility, and are concentrated in Europe and the public sector. Eighty-five percent of European workers comply with hybrid policies, compared to just 74% of U.S. workers.

The "empowered non-complier" is typically younger, often a caregiver, concentrated in tech roles in North America, and tends to be high-performing with skills that make them valuable enough to flout the rules. Their non-compliance isn't rejection—it's "a calculated decision based on their sense of empowerment." The catch: they're also at higher risk of leaving.

Are degree requirements actually declining?

Despite widespread discussion of skills-first hiring, bachelor's degree requirements have actually increased since early 2024, according to Indeed's Hiring Lab.

In November 2025, 19.3% of U.S. job postings required a bachelor's degree or higher—up from 16.6% in November 2023. More telling: these increases are happening within occupations, representing "genuine increases in formal education requirements rather than occupational composition shifts."

The geographic divide is stark. After adjusting for occupational mix, 22.4% of jobs in Washington, D.C. require a bachelor's degree compared to just 10.6% in Alaska. Coastal metros like Boston, New York, and Chicago show at least 20% of postings requiring degrees. Meanwhile, 51% of all postings still don't require formal education—though research shows these roles often end up hiring candidates with college degrees anyway.

How fragmented is the modern workday?

Workers now average just 2-3 hours of uninterrupted focus time per day, according to Hubstaff's 2026 Global Benchmarks Report analyzing data from 140,000+ workers across 17,000 organizations.

"When a worker's day is fragmented by meetings, messages and tool switching, real focus is out of reach," said Jared Brown, Hubstaff's CEO.

Meeting volume has doubled, with organizations running nearly six times as many meetings compared to two years ago. A quarter of all meeting time occurs during peak deep work hours, while nearly a third happens outside standard business hours.

Hybrid teams struggle most, reporting just 31% of hours in deep work compared to 41% for remote teams and 45% for in-office workers. Managers and leaders face the worst fragmentation, averaging just 27% of their hours in focused work. Tool overload compounds the problem: workers use an average of 18 different apps per day.

Does PTO actually reduce turnover?

Employees receiving moderate to high levels of paid time off show meaningfully lower resignation rates, according to longitudinal research published in the Journal of Strategy and Management analyzing over 32,000 observations across 18 years.

The threshold matters. Employees receiving 1-5 paid days off per year showed little difference in voluntary resignation rates compared to those with no PTO. But employees receiving 6-10 days (moderate) or 11+ days (high) demonstrated meaningful reductions in voluntary resignations.

The research also revealed a gender gap: women responded significantly more to higher levels of paid time off than men in terms of retention.

Why is Gen Z least confident about AI?

Gen Z workers are the least likely to believe AI will advance their careers or improve work efficiency—even though they're the most digitally native generation, according to LinkedIn's first AI Confidence Survey.

Daily AI usage at work has surged: U.S. employees are now 2.4 times more likely to use AI tools daily or weekly compared to 18 months ago. Roles requiring AI literacy grew 70% year-over-year. But Gen Z reports the lowest confidence across all measures, and is least likely to say they feel supported in learning the technology or plan to build new AI skills proactively. Notably, Gen X is most likely to say they feel supported in building AI skills.

The executive-worker disconnect is widening. Sixty-seven percent of executives feel confident employees will learn new AI tools in the next six months, and 70% believe AI is already making their workforce more efficient. Meanwhile, only 45% of workers say they feel supported in gaining AI skills. Active job seekers are significantly more likely to embrace AI—using tools to rewrite resumes, prepare for interviews, and accelerate skill-building.

What's the case for AI that empowers rather than replaces workers?

A new AI startup called Humans& says artificial intelligence "should empower people rather than replace them," according to The New York Times.

Founded by former Anthropic, xAI, and Google employees, Humans& has raised $480 million in seed funding from Nvidia, Jeff Bezos, and Google Ventures, achieving a $4.48 billion valuation with just 20 employees three months after launch.

The founders say the idea started with creating "software that facilitated collaboration between people—like an A.I. version of an instant messaging app—while also helping with internet searches and other tasks that suit machines." While Anthropic's model is trained to "work autonomously," Humans& says it thinks of "machines and humans as complementary."

Do AI agents have fundamental limitations?

Large language models are "incapable of carrying out computational and agentic tasks beyond a certain complexity," according to research by former SAP CTO Vishal Sikka, reported by Futurism and Wired.

Some employers have already begun replacing human workers with AI agents, only to "quickly realize the agents weren't anywhere near good enough to replace the outgoing humans, perhaps because they hallucinated so much and could barely complete any of the tasks given to them."

Sikka told Wired that AI agents should not be trusted with critical functions like running nuclear power plants, despite hype from "AI boosters." However, he also believes "hallucinations can be reined in" through external guardrails and components built around LLMs that "overcome those limitations."

AI Roundup

Autonomous snow blowers are here. A $4,999 robot snow blower cleared a New Jersey driveway during last week's storm, reported by ABC7 and Business Insider. The 230-pound device is made by Yarbo.

AI chatbots are causing mental health crises. According to The New York Times, dozens of doctors and therapists report that AI chatbots have "led their patients to psychosis, isolation and unhealthy habits." More than 30 physicians noted cases resulting in dangerous emergencies including psychosis or suicidal thoughts.

ChatGPT erased two years of work. A German professor lost grant applications, teaching materials, and publication drafts when he disabled ChatGPT's data consent option and discovered all previous chats were "permanently deleted," according to Windows Central.

AI may soon write federal regulations. The Trump administration is planning to "use artificial intelligence to write federal transportation regulations," according to ProPublica.

Spotlight: How Rising Healthcare Costs Are Impacting Workers and Employers

Healthcare spending now accounts for nearly 18% of the U.S. economy, with costs for employer-sponsored family coverage hitting $26,993 annually in 2025. Forty-seven percent of Americans are worried they won't be able to afford necessary healthcare this year, while 59% of employers plan cost-cutting changes to their health plans in 2026—the highest rate in years.

Read the full Spotlight: How Rising Healthcare Costs Are Impacting Workers and Employers →

Global Snapshot

China: In Q4 2025, China experienced a "distinctive surge in demand for talent" related to advanced technology and manufacturing, with AI, new-generation information technology, and new energy generating significant employment demand in urban centers, according to Caixing Global and South China Morning Post.

Germany: Bus and rail services ground to a halt on February 2 as Verdi, Germany's primary public services trade union, called an almost nationwide strike over work conditions, according to Reuters.

Japan: Almost half (45%) of highly skilled foreign workers entering Japan under specialized programs earn less than JPY 240,000 (USD 1,540) per month—below the average starting salary for new university graduates, according to SIA.

Switzerland: Immigration fell in 2025, though permanent foreign residents still grew by about 75,000. Seventy percent of EU nationals who moved to Switzerland cited employment as the chief pull-factor, according to VisaHQ.

United Kingdom: Job openings continued falling in December—the sixth consecutive monthly decline—while salary growth slowed, according to Reuters.

Get the full interactive edition → View in digital reader

Stay ahead of the market → Subscribe to the Need to Know Briefing to get workforce intelligence delivered to your inbox every week.

About the Need to Know Briefing

The Need to Know Briefing is published weekly by Kelly, curating the most important workforce and hiring insights for HR leaders and hiring managers.