The American labor market has become one of the biggest questions in the economy.
As the government shutdown stretches into its second month, now the longest in U.S. history, investors and government officials have been left in the dark. There are no employment reports, no JOLTS data, and no clear understanding of how hiring, wages, or participation are actually holding up.
Private and survey data filled some of that void this week, painting a picture of a labor market that is holding firm but losing steam as layoffs increase and confidence declines.
“Hiring has slowed dramatically,” Betsey Stevenson, a University of Michigan professor and former member of the Council of Economic Advisers under former President Barack Obama, told Yahoo Finance on Friday.
“So if you have a job, great, but if you lose it, you’re in more trouble than you would have been in a year or two ago,” he said.
Their warning aligns closely with the latest private data.
According to payroll processor ADP, private employers added 42,000 jobs in October, the first monthly increase since July but still a fraction of what investors saw earlier this year. Hiring was strongest in the trade, transportation and public services sectors, while the professional and information services sectors, key drivers of white-collar growth, lost jobs.
Hardika Singh, economic strategist at Fundstrat, said in a Thursday note: “ADP private payrolls said the number of jobs added grew last month. But the creation is not predominantly coming from AI-related industries, which is a bit shocking considering investors are betting on AI advances becoming a major driver of economic growth.”
The most important takeaway, Singh argued, is that while corporate profits are benefiting from AI-driven productivity, the same can’t be said for workers: “You can’t get excited about stocks trading just below all-time highs when you’re afraid of losing your job.”
To that point, layoffs are on the rise, another sign that the labor market is cooling beneath the surface.
Read more: How to financially survive a furlough
Challenger, Gray & Christmas reported more than 153,000 job cuts announced in October, the worst for that month since 2003. The company cited cost-cutting, the adoption of artificial intelligence and overhiring during the pandemic era as the main reasons behind the increase.
In total, companies have announced more than 1.1 million layoffs so far this year, a 44% increase over the total number of layoffs in 2024. Technology and retail have led the reductions, with notable announcements from Amazon (AMZN), Target (TGT), and UPS (UPS), among others.
