Businesses in the Rocky Mountain region are signaling a shift toward stable employment levels and slower wage growth as they look ahead to 2026, according to the latest surveys from the Federal Reserve Bank of Kansas City. The findings, drawn from recent Manufacturing and Services Surveys covering Colorado, Wyoming, and New Mexico, indicate that fewer firms plan to expand their workforce compared to previous years.
About 30 percent of businesses surveyed in November 2025 expect to increase headcount over the next year. This is a decrease from nearly 50 percent at the end of 2024 and down from 40 percent reported in September 2025. Meanwhile, more firms anticipate reducing employment levels; the share expecting lower headcounts rose to 31 percent in November 2025 from 12 percent in 2024. Overall, projections for job gains are now balanced between those planning to hire and those expecting reductions.
The motivations behind hiring have also changed. At the end of 2024, many companies aimed to address overworked staff or add specific skills due to demand. By late 2025, only businesses forecasting demand growth planned expansion, while waning demand has become a primary reason for limiting hiring.
Wage strategies are also shifting. Around one-third of surveyed firms plan to keep wages for new hires steady in the coming year—a larger share than in prior years. Only 16 percent reported increasing pay for select job categories compared with nearly 30 percent previously. Employers are less likely now to raise wages specifically for recruitment or retention purposes; instead, wage adjustments are increasingly tied to cost-of-living changes rather than competition for workers.
Approximately 29 percent of businesses intend to maintain wage increases for current employees at rates similar to recent years, while others anticipate raising wages more slowly or keeping them flat. This trend points toward moderate wage growth compared with higher rates seen earlier.
Most firms have not reduced their workforce in recent months; about 56 percent reported no reduction at all during the past three months. Among those who did reduce staff numbers, most did so through attrition or by closing open positions without replacement rather than through layoffs—only about 11 percent implemented selective layoffs during this period.
The regional labor market is described as “low-hire, low-fire,” with reduced turnover and limited hiring activity throughout much of 2025. Businesses appear focused on maintaining steady employment levels while moderating compensation strategies.
Looking forward into next year, it remains uncertain whether labor markets will continue this balanced path or face new challenges that could affect employment and wage trends.
“The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.”
