By Ryan Smith, Senior Solutions Advisor, True Insurtech Solutions
Stephen Cooper opened his session in Orlando with an uncomfortable framing. The U.S. job market posted its slowest growth outside a recession in more than two decades, but the workers’ compensation system kept turning. Premium held. Frequency declined. Combined ratios stayed below 95. The question is not whether 2025 was strange. It is how long the things that masked the strangeness can keep doing it.
Cooper is NCCI’s Practice Leader and Senior Economist, and his AIS 2026 update on the state of the economy was less a victory lap and more a careful map of where the seams are. Our pre-conference take on these themes lives on our AIS 2026 Resource Hub. The 2026 economic story that workers’ comp leaders need to manage around is not the headline GDP number or the unemployment rate. It is what Cooper called out underneath them, and what those undercurrents mean for premium, frequency, and severity over the next several quarters.
2025 Was the Slowest Job-Growth Year Outside a Recession Since 2003
The framing Cooper used was direct. Outside of recession years, 2025 produced the slowest job growth the U.S. economy has seen in more than 20 years. Net new jobs barely moved across the year, and the distribution of what did get added was concentrated in a single sector.
Health Care and Social Assistance was responsible for nearly all of the year’s net new positions. Most other sectors lost ground. The monthly employment index Cooper shared showed Transportation and Warehousing, Government, Combined Office, Manufacturing, and Total Trade all running below their December 2024 baselines through most of 2025. Construction, Leisure and Hospitality, and the All Other category held positive territory, but only just.
Job openings and direct hires both softened materially. Cooper noted that direct labor demand has softened more than indirect demand. Hires are no longer exceeding separations on a sustained basis, which is a meaningful inflection compared with the post-pandemic pattern. The unemployment rate held historically low, but the underlying churn dropped. And that drop in churn is the part of the labor market story that matters most for workers’ comp.
Why Payroll Still Grew 4.8% Anyway
Here is the part of the story that seems contradictory at first. Total payroll grew 4.8% from 2024 to 2025, and that growth is what kept workers’ comp net written premium essentially flat in a year of continued rate decreases. A jobs-light year, and yet premium math held. How?
The composition explains it. Employment contributed only 0.5% of that 4.8%. Wage rate contributed the other 4.3%. Workers’ compensation premium is built on payroll, and in 2025 that payroll growth was almost entirely a wages story rather than a hiring story. That is a fundamentally different premium environment than the one most underwriting departments are used to modeling.
Cooper also flagged structural shifts in how wages are growing. Salaried worker wage growth has been outpacing hourly worker wage growth. The wage premium that job-hoppers used to earn has effectively disappeared, with switchers and stayers now showing similar wage growth on a 12-month moving average basis. Translation: the wage growth holding premium up is largely happening inside existing jobs, not through the labor market churn that historically rebalances exposure across employers and classes.
For CFOs and Chief Underwriting Officers, the implication is worth sitting with. Premium volume now depends on a wage growth dynamic that is concentrated, age-skewed, and increasingly tied to retention rather than hiring. If wage growth softens in the back half of 2026, premium math gets harder fast.
The Quiet Frequency Tailwind Hiding in the Hiring Slowdown
One of the most actionable points Cooper made was the connection between reduced labor market churn and claim frequency. He framed it plainly: reduced turnover can benefit frequency trends. That is a sentence worth pinning to the wall.
Paul Hendrick’s later session, From Demographics to Claims, reinforced the same point from inside NCCI’s claim data. The share of new-hire claims (claims involving workers with less than one year of experience) has been declining since 2022. NCCI’s analysis showed the cumulative change in new-hire claim share moving in lockstep with the JOLTS hires rate. New hires are roughly 20% of the labor force but about 40% of lost-time claims, and their claim frequency is roughly double that of all workers.
Putting the two sessions together gives you the picture. The same labor market dynamic that made 2025 feel sluggish for employers was actively suppressing the population of workers most likely to file a lost-time claim. That helped the frequency line look better than the underlying safety improvements alone would explain.
The strategic question is what happens when hiring accelerates. Cooper and Hendrick both flagged early signs of labor market strengthening in 2026, and historically, frequency rebounds when new hires come back into the workforce. Carriers planning 2026 underwriting and claims capacity should be modeling a scenario in which the frequency tailwind partially reverses.
Inflation, Tariffs, and Why Stagflation Probably Isn’t the Risk
Cooper spent a meaningful portion of his session on inflation, tariffs, and the question many carriers asked through 2025: is this a repeat of the 1970s?
His answer was no, and the data supported it. Inflation softened in 2025 but remained stubbornly above target. Tariff impacts on headline inflation have been muted so far. Most of the recent CPI acceleration has come from energy rather than core goods or services. And the oil shocks of today are minor compared to the 1973-74 and 1979-80 events, both in magnitude and duration.
Cooper’s framing of stagflation risk was unusually direct. Stagflation requires both elevated inflation and rising unemployment, and the labor market remains in balance with both demand and supply having cooled. The risk is low. The more relevant concern for consumer-driven economic activity is affordability fatigue. The cumulative rise in the consumer price index since December 2019 is roughly 28%, and that compounded burden is what is dampening consumer confidence rather than any new shock.
For workers’ comp, the implication is more nuanced than a binary inflation read. Indemnity severity tracks wages, and wages are holding. Medical severity is partially tariff-exposed through imported durable medical equipment, supplies, and pharmaceuticals, but Cooper’s view is that the price channel alone is unlikely to push medical inflation dramatically higher in 2026. The bigger medical severity lever is utilization, which we covered in the pre-event medical severity outlook earlier in this series.
Early 2026 Signals: A Cautious Turn Upward
The most encouraging data Cooper shared was on 2026 year-to-date trends through April. The labor market is showing signs of broadening rather than narrowing further.
On an annualized basis, payroll growth is running at +4.9%, with employment contributing +0.8% and wage rate +4.1%. The employment contribution has more than doubled from 2025’s full-year reading, and the gains have broadened beyond Health Care into Construction, Manufacturing, Trade, and Leisure and Hospitality. The picture is not boom-like, but it is meaningfully more balanced than what we saw last year.
Cooper described the labor market as still in balance, with both demand and supply having cooled to a level that supports moderate but sustainable growth. Forecasters polled by Bloomberg expected another resilient year of growth in 2026, led by productivity gains. The upside risks include productivity, a labor market rebound, and the possibility of tax or tariff refunds boosting consumer activity. The downside risks include continued economic uncertainty, stagflation (which Cooper considers low probability), and unforeseen shocks.
The Long View: What 200 Years of Technological Change Tells Us
Cooper closed his session with a longer-arc story that is worth sharing because it connects directly to the workforce questions Tracy Ryan, Jeremy Attie, and others raised throughout AIS 2026.
Looking back at U.S. employment composition since 1850, technological change has consistently reshaped the kind of work being done. The share of employment in farming and mining has fallen by roughly 57% over that timeframe. The biggest gains have come in what NCCI calls relational services, which has grown by 36.5% as a share of employment between 2000 and today. That is the category that requires people working with other people, which automation has historically struggled to replace.
Cooper’s takeaway was practical. Some jobs will cease to exist while new ones will be created, and relational (people-to-people) sectors will likely account for a growing share of jobs going forward. For workers’ comp, that maps to continued growth in Health Care and related classes, which is exactly the pattern we see in 2025 employment data and in NCCI’s claim mix.
What This Means for Carriers, Underwriters, and Claims Leaders
Three operational implications from Cooper’s session deserve attention as you plan the rest of 2026.
First, the premium math is more fragile than the headline payroll number suggests. With 4.3 of every 4.8 points of payroll growth coming from wages, the premium base is sensitive to wage softening in ways that pure hiring metrics do not capture. Underwriting and finance teams need exposure modeling that can separate wage growth from headcount growth at the class level, not just aggregate payroll. Modern policy administration platforms like TruePolicy™ are designed to make that kind of granular exposure visibility part of standard underwriting practice rather than a special analytical exercise.
Next, the frequency tailwind we have been enjoying is borrowed. The connection between low labor market churn and reduced new-hire claims is well-supported in NCCI’s data, and the corollary is that when hiring accelerates, frequency historically follows. If Cooper’s early-2026 signals continue, carriers should be planning for claim volume growth that may outpace the 2025 baseline.
Finally, concentration risk in Health Care premium is real and worth pricing for. Health Care and Social Assistance carried U.S. employment growth in 2025 and continues to absorb a disproportionate share of new hires. That sectoral concentration means Health Care exposure is increasingly central to most carriers’ overall book. The demographic and injury patterns specific to that sector, which we covered in the pre-event demographics piece earlier in this series, deserve their own underwriting and reserving attention.
Why This Matters
Stephen Cooper’s economy update was not a forecast. It was a description of a delicate balance, and the places where that balance could go either way. Wages are doing the work of premium. Reduced churn is doing the work of frequency. Tariff effects have been muted. None of those are permanent conditions, and the carriers and administrators who plan as if they are will be the ones surprised when the underlying dynamics shift.
The carriers I see managing through this kind of environment well share one trait. They have built the analytical capability to translate macro signals into book-level decisions in something close to real time. They know what wage growth in their key classes looks like before the BLS prints it. They can see their new-hire exposure trending in their own data. They can model how a 50-basis-point shift in wage growth would change their premium volume by state. That is the kind of operational visibility that separates the strong books from the average ones in a year like the one Cooper described.
Continue the Conversation
If you want to talk through how the 2025 economic environment is affecting your specific book, or how to build the kind of platform visibility that turns macro data into operational moves, book a discovery call with me.
Additional Resources from NCCI
For readers who want to go directly to the NCCI source materials referenced in this post:
