Delaware's 2025 Labor Market: Rising Strain and Shifting Job Trends

The Delaware Department of Labor's Monthly Labor Review offers key insights into the state's labor market, shining a light on the changing dynamics that are shaping Delaware’s economic landscape. A review of all 11 issues from 2025 (excluding October) reveals troubling trends that warrant careful consideration. As Delaware's economy evolves, it’s clear that the state's workforce is increasingly dependent on healthcare and government jobs, while other sectors face significant challenges.

Jobs Are Up, but Unemployment Is Rising

At first glance, Delaware’s job numbers seem promising. From January to December 2025, nonfarm employment increased by 5,400 positions, rising from 490,700 to 496,100 jobs. However, the unemployment rate told a different story. It climbed steadily from 3.6% in January to 5.2% by December, ending the year almost a full percentage point higher than the national average.

This apparent contradiction—job growth paired with a rising unemployment rate—points to a critical factor: labor force participation. Delaware’s civilian labor force expanded by nearly 10,000 people in 2025, but only 5,400 new jobs were created. This imbalance between new workers entering the labor market and the number of available positions directly contributed to the increase in unemployment.

Healthcare Dominates the Job Market

A deeper look into the data reveals a concerning trend: Delaware’s job growth is overwhelmingly concentrated in one sector—healthcare. The Private Education and Health Services category accounted for nearly all job gains, with healthcare playing a dominant role. Month after month, the sector consistently added between 100 and 300 jobs. By December 2025, healthcare employed 91,300 people, making it Delaware's largest employment sector.

While this growth is understandable given the state's aging population and the increasing demand for medical services, it presents a challenge for Delaware’s economic diversity. Healthcare is largely driven by government programs, insurance, and regulation—not by market forces or entrepreneurial activity. Relying too heavily on this sector limits the state's economic resilience, as it leaves little room for innovation or growth in other areas.

Weaknesses in Private Sectors

Meanwhile, sectors that are more dependent on market forces are facing setbacks. Manufacturing in Delaware continued to decline throughout 2025, with job losses in both durable and nondurable goods production. Similarly, the Leisure and Hospitality sector, which relies on discretionary consumer spending, ended the year in the red. These declines point to a worrying trend: Delaware’s private-sector economy, apart from healthcare, is struggling.

Government employment has its own story. Local government payrolls grew modestly, but federal government employment in Delaware saw a noticeable drop in the latter half of the year. State government employment also contracted.

The trend is particularly stark in urban areas like Wilmington, Dover, and Newark. Wilmington’s unemployment rate ended the year at 6.5%, while Dover’s was slightly higher at 6.8%. Even Newark, often seen as an economic hub, recorded a 7.0% unemployment rate—double the number from two years ago, despite substantial investments in the University of Delaware’s STAR Campus and the advantages of a university town.

Delaware’s Economic Future

These patterns raise an essential question: Can Delaware’s economy create enough private-sector jobs outside of healthcare and government to support a growing population, particularly as the state grapples with the challenges of an aging demographic?

Here’s what policymakers should consider moving forward:

• Demographics Matter: Delaware has the fourth-oldest population in the U.S. According to the Delaware State Chamber of Commerce’s 2026 Competitiveness Bluebook, the state’s aging workforce will require targeted policy solutions. These policies need to address the unique challenges of a smaller, older workforce, in contrast to the strategies of high-tax, high-regulation states like California, which increasingly influence Delaware’s economic policy landscape.

  
  

• Diversification is Key: The concentration of job growth in healthcare should be a cause for concern. To ensure long-term economic health, Delaware needs to create opportunities in other sectors—particularly those that foster innovation and private capital growth. This could mean opening up markets to more competition, reducing regulatory barriers, and reconsidering restrictive programs like the Certificate of Public Review (also known as certificate of need).

  
  

• Revitalize Manufacturing: Delaware was once a major player in the manufacturing sector, but that is no longer the case. The state needs to ask itself whether it wants to remain a competitive location for manufacturing. The current trajectory suggests the answer is “no,” but if the state hopes to reverse the trend, it will need a new, proactive strategy that makes Delaware an attractive place for manufacturers again.

  
  

As Delaware enters 2026, its economy faces a delicate balancing act. With a growing labor force, a dominant healthcare sector, and a struggling private economy, the state must carefully consider its economic future. Simply replicating the policies of high-regulation states will not be enough. Delaware must foster a more diverse, resilient economy that doesn’t rely too heavily on government and healthcare jobs to carry the load. The decisions made in the coming years will determine whether Delaware can truly thrive in an evolving national and global economy.

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