Cannabis Industry Employment Fell 2.7% in 2025, Vangst Report Finds

Employment Contraction Follows Revenue Decline

Cannabis industry employment fell 2.7% in 2025, the first year-over-year decline since Vangst and Whitney Economics began tracking the sector. The report attributes the job losses directly to a 3.3% decrease in total U.S. cannabis sales, marking the industry's first revenue contraction in a mature-market cycle.

Price compression drove the losses. Oversupply in key states and increased competition from illicit markets reduced per-unit revenue for operators. Retail checkout data analyzed in the report showed that while basket sizes remained stable in most states, average transaction values declined as flower prices fell and consumers shifted toward lower-priced product tiers.

Cultivation and Processing Bore Heaviest Cuts

Cultivation and processing operations accounted for the majority of job losses, reflecting structural oversupply in several mature markets. California, Michigan, and Colorado—three of the five largest state markets by revenue—each reported double-digit percentage declines in cultivation licenses active as of December 2025, per state regulatory data cross-referenced in the Vangst report.

Cultivation headcount fell faster than retail headcount. Retail employment declined 1.8%, while cultivation and processing employment dropped 4.1%. The divergence reflects retail's lower exposure to commodity price risk; store-level labor costs are relatively fixed, while cultivation operators cut staff in direct response to falling wholesale prices.

Operators in states with uncapped license issuance—Michigan, Oklahoma, and Oregon—faced the steepest margin pressure. Wholesale flower prices in Michigan averaged $850 per pound in Q4 2025, down from $1,200 per pound in Q4 2024, according to state-level pricing indices cited in the report.

Federal Tax Burden Compounds Margin Pressure

IRC §280E continues to impose effective tax rates of 70% or higher on cannabis operators, amplifying the impact of revenue declines on net income and hiring capacity. Operators subject to §280E can't deduct ordinary business expenses—including payroll—when calculating federal taxable income, leaving them with significantly less cash flow than comparable businesses in other sectors.

For operators with declining gross receipts, the §280E burden becomes more acute. A 10% revenue decline doesn't translate to a proportional tax savings; instead, operators face the same tax rate applied to a smaller revenue base, compressing after-tax margins further. The report estimates that §280E added an average of $47,000 in federal tax liability per employee in 2025, based on median operator financials.

No relief from §280E is expected in the near term. The DEA's proposed rescheduling of cannabis to Schedule III—announced in 2024 and still pending as of June 2026—would eliminate the §280E disallowance, but the rule remains under administrative review with no final effective date.

State-Level Variance in Employment Trends

Employment outcomes varied sharply by state, with newer markets adding jobs while mature markets contracted. Ohio, which launched adult-use sales in August 2024, added an estimated 3,200 cannabis jobs in 2025. New York, still ramping retail buildout, added approximately 1,800 jobs. Both states benefited from initial license issuance and store openings that offset declines elsewhere.

California, the largest market by revenue, lost an estimated 4,500 jobs—the steepest absolute decline of any state. The California Department of Cannabis Control reported 847 active cultivation licenses as of December 2025, down from 1,021 in December 2024, a 17% year-over-year drop. Retail licenses remained relatively stable at 1,104, down 2.3% from the prior year.

For full background on this story, see the CannIntel topic hub on Cannabis Industry Employment.

Outlook: Stabilization Contingent on Federal Action

The report projects flat-to-modest employment growth in 2026, contingent on Schedule III finalization and state-level market maturation. If the DEA finalizes Schedule III rescheduling in 2026, operators would gain access to standard business deductions beginning in the tax year the rule takes effect, improving cash flow and potentially stabilizing headcount.

Absent federal reform, employment is likely to remain under pressure in oversupplied states. Michigan, Oklahoma, and Oregon are markets where further consolidation and license attrition are probable, according to the report. Conversely, Pennsylvania, Maryland, and Minnesota—states with adult-use programs launching in 2026 or 2027—are expected to add jobs as retail infrastructure scales.

The next Vangst-Whitney Economics employment report is scheduled for release in June 2027. Operators and analysts will be watching three indicators: Schedule III finalization timing, state-level license-cap policy changes, and interstate commerce developments that could redistribute supply across state lines.