At the same time, the United States job market is under unprecedented pressure. It added between 102,000 and 158,000 jobs per month through June, but recent trends point to a slowdown in the months to come. Artificial intelligence (AI) and tariff issues have been particularly important in driving job losses. This dangerous trend should frighten anyone who cares about the country’s future employment picture. As the economy continues to deal with these increasing hurdles, signs point toward a higher unemployment rate and a shrinking workforce.
Though the job market has shown a level of resilience these last few months, new data paints a different picture. Just last month, AI drove over 10,000 layoffs. So far this year, tariff-related fears have wreaked havoc on almost 6,000 jobs. The average length of time someone is unemployed jumped to 23 weeks in June. This historic jump coupled with other indicators shows profound changes underway in our employment environment.
Rising Unemployment and Labor Force Participation
The unemployment rate is expected to increase slightly to 4.2% from 4.1% in June. Today, released employment data showed last month’s unemployment rate falling. It wasn’t all good news — the labor force shrunk as well, a sign that fewer Americans are actively searching for work. The participation rate took a similar tumble in June, which adds more confusion to the job market’s recovery path.
According to data released today by the Job Openings and Labor Turnover Survey, job openings decreased in June. This decline indicates that businesses are putting off hiring as a result of continued economic uncertainty. The quits rate has fallen beneath the five-year average, a sign that workers are less confident about striking out on their own for new opportunities.
“There just are no jobs right now, AI or no AI, tariffs or no tariffs.” – Heather Long
Additionally, the diffusion index of private industries measured 49.6 in June, highlighting that more industries lost jobs than added them. This positive trend begs the question, how long can this job growth continue across the public and private sectors?
Sector-Specific Job Gains and Challenges
Even with the general national plunge in job growth, some sectors are still experiencing positive growth. The US labor market has experienced job growth predominantly concentrated in health care, social assistance, and state and local government businesses. Yet, such dependency on a highly concentrated segment of the economy presents a dangerous vulnerability to market fluctuations and external pressures.
Andrew Challenger explained that the influence of federal budget cuts has taken a toll on industries including nonprofits and health care. He stated, “We are seeing the federal budget cuts implemented by [the Department of Government Efficiency] impact nonprofits and health care in addition to the government.” This has implications far beyond those industries which had been doing well, as the recession’s roots in macro policies affect all sectors of the economy.
Additionally, persistent tariff disputes are further aggravating workforce uncertainty. Challenger pointed out that “AI was cited for over 10,000 cuts last month, and tariff concerns have impacted nearly 6,000 jobs this year.” This duality of challenges is a key example of how various forces are coming together to create a very tight labor market.
Long-Term Outlook and Economic Predictions
The long-term impact on the job market is anyone’s guess as economic indicators go both ways. Initial jobless claims have shown a decrease for six consecutive weeks. Continuing unemployment claims remain near a high not seen since November 2021. This lack of consistency is felt most acutely in the context of job security and the nation’s economic recovery.
Later, Elizabeth Renter stressed the reluctance of firms to take hiring actions in uncertain periods. She remarked, “When companies can’t make predictions about the economy and therefore their operations, they tend to wait for more information.” This reluctance on the part of employers could help explain the one-year low in hiring we saw in June.
Bringing this back to the recession, Heather Long shared her alarm about the heavy dependence on just a few sectors for job creation. She stated, “We’re getting more and more reliant on a very small part of the economy to drive any sort of job growth.” Such a dependency would be dangerous in the event that those sectors experience an economic downturn or shifts in regulation/legal landscape.