The United States labour market is showing clear signs of losing momentum, with the latest employment data revealing a significant deceleration in hiring. While specific figures for November were influenced by temporary shutdown-related factors, economists assert the underlying trend is unmistakable: job creation has shifted into a prolonged period of sluggish growth.
A Labour Market in Low Gear
Although American employers continue to add workers, the current pace of hiring ranks among the weakest observed in the past two decades. The unemployment rate has edged higher, partly driven by more individuals entering the workforce but not immediately securing employment. Concurrently, concerning trends have emerged, including a rise in long-term unemployment, an increase in the number of discouraged workers, and a further widening of economic disparities.
Dan North, senior economist for North America at Allianz Trade, characterised the situation to CNN, stating, "Hiring, while certainly not on a freeze, is on hold; and people that have jobs are absolutely holding on to them with white knuckles." He added, "I see that as definitely a labour market that’s stagnating."
Structural Shifts and a New Normal for Job Growth
Despite the hiring cooldown, the broader US economy has avoided contraction, maintaining steady growth and resilient productivity levels. The average monthly job gain now stands at approximately 55,000, a figure reflecting heightened uncertainty stemming from trade policy, immigration rules, and the general political climate.
Joe Brusuelas, chief economist at RSM US, explained to CNN that fundamental changes in workforce demographics are reshaping employment dynamics. As the Baby Boomer generation retires and immigration faces tighter restrictions, the overall supply of labour is shrinking. Consequently, the economy no longer needs to generate as many jobs monthly to maintain stability. "My estimate is that we need to hire 50,000 a month to keep the labour market conditions stable," Brusuelas stated.
Under this new paradigm, economic growth could hover near 2%, financial conditions may stay supportive, and inflationary pressures might ease. From a purely economic perspective, Brusuelas noted this scenario is sustainable and could last for years. However, he issued a stark warning: the benefits will not be distributed evenly. In a K-shaped economy, higher-income households are poised to continue benefiting, while lower-income groups face mounting strain as hiring opportunities diminish.
Artificial Intelligence and Policy Uncertainty Cloud the Future
Looking forward, economists identify multiple forces that could pull the labour market in different directions. A major unknown is artificial intelligence (AI) and the speed at which it might transform employment patterns. In the short term, uncertainty around AI adoption is making companies cautious about expanding their payrolls.
Tyler Schipper, associate professor of economics at St. Thomas University in Minnesota, told CNN that AI, combined with stricter immigration enforcement and unresolved policy questions, is acting as a drag on labour market growth. "The question I ask myself is, 'What would be the conditions in which I think the labour market would ramp back up?' and some of those are policy-related," he said. "I have a hard time seeing those resolving themselves anytime soon."
Echoing the concerns about uneven recovery, Schipper added, "For better or worse, I think we could be in this K-shaped economy for some time. And I think the way out of it probably is that there’s a recession before things get better, which is never what you want to hear if you’re on the lower leg of the K."
However, not all outlooks are pessimistic. Cory Stahle, an economist at Indeed Hiring Lab, suggested hiring could eventually accelerate, though the turnaround will likely be gradual. "The US labour market is like a pretty big ship turned by a rudder," he told CNN. "Sometimes it takes a little time to turn around."
Potential catalysts for improvement include recent interest rate cuts by the Federal Reserve, whose effects typically take three to five quarters to permeate the economy. Reduced uncertainty, whether from clearer policies or economic stability, could also encourage employers to be more proactive with hiring plans. For now, as Brusuelas pointed out, businesses continue to grapple with unanswered questions on interest rates, prices, government policy, and impending tax laws, keeping uncertainty a dominant force.
