Economist Corner

Key Takeaways

According to the Bureau of Labor Statistics’ (BLS) most recent report, employment in the U.S. increased by 22,000 in August 2024. The unemployment rate nudged up to 4.3%.
Job creation has slowed significantly, with average monthly growth at just 27,000 over the past four months—a level not seen since 2010.
Both the U-3 and U-6 unemployment rates are rising. This, combined with a downward trend in labor force participation, indicates that people are becoming discouraged and dropping out of the job market.

Key Employment Insights

Payroll on the decline
October’s largest payroll gains were in the Manufacturing and Professional & Business Services sectors. Transportation and Information Technology sectors saw the biggest decline.
Federal job cuts hampered employment growth in Q1
The recent job cuts to the federal workforce has negatively impacted the country's overall employment growth in Q1. Based on recent data from the BLS, these cuts will continue to have a negative ripple affect throughout the rest of the year.
100k jobs lost due to recent natural disasters
Nearly 100,000 individuals lost their jobs in Q1 due to the recent wildfires, hurricanes, and flash flood that have impacted most of the country.

Looking Ahead in Q2

Tariffs will continue to impact labor market
Based on preliminary data from the BLS, the ongoing tariff war could result in the loss of nearly 100,000 jobs across the US in Q2 alone. As businesses continue to struggle with prices, we could expect an increase in layoffs to compensate for the higher overhead costs.
New legislation is expected to boost US employment
New legislation proposed by the Trump administration to abolish taxes could result in a significant boost to the U.S. labor market, potentially adding one million jobs across the country.
Cutting interest rates could lead to recession
If the Federal Reserve fails to achieve a soft landing in the coming months, economists predict it might send the country into a recession and result in the loss of thousands of jobs.

Breaking it Down Further

Leaving aside the 79,000 new jobs in July that may be revised down later, the pattern over the last four months reveals employment is stagnant. June employment actually saw a decline to help drag average monthly job creation to 27,000 over the last four months. The last time employment growth over four months was that low, besides the initial months of the pandemic, was September 2010.

Transportation and retail employment underperformances indicate that tariff policy disruptions have hit businesses and consumers. Paired with stronger-than-average hiring in Repair & Maintenance subsectors, this may suggest a shift in consumer behavior toward repairing rather than replacing goods. We see weakness in transportation creeping into other sectors, as Manufacturing would have had positive growth if not for Transportation Equipment Manufacturing shedding 15,000 jobs. August might have been the month that the boomerang effect became noticeable after the pick-up in activity to avoid tariff deadlines had died down.

The U-6 unemployment rate, which includes discouraged, underemployed, and unemployed workers in the country, rose to 8.1% in August, reaching its highest level since October 2021. The U-3 unemployment rate, which measures only the number of unemployed people actively seeking work, increased to 4.3%.

A rising unemployment rate (both U-3 and U-6) combined with a declining labor force participation rate is a worrying combination. In August, the labor force participation rate increased, but since April, the trend appears to be downward. This suggests that some individuals who were previously looking for work have become discouraged and stopped searching, while those remaining in the labor force are finding it more difficult to secure employment. It is believed that the U-3 unemployment rate might have been worse without the immigration crackdown that began earlier this year, which has reduced the labor supply.

How have the federal job cuts impacted the labor market?

We will begin in this chapter by dealing with some general quantum mechanical ideas. Some of the statements will be quite precise, others only partially precise. It will be hard to tell you as we go along which is which, but by the time you have finished the rest of the book, you will understand in looking back which parts hold up and which parts were only explained roughly.

What are the implications of the tariff war from a labor perspective?

Will getting rid of taxes really jump start the labor market?

How optimistic are economists about the labor market in the coming months?

Key Unemployment Insights

Steady as it goes
Throughout Q1 2025, The unemployment rate has consistently remained low at 4%, indicating a stable job market, boosting economic growth and consumer confidence.
Shifting Job Vacancy Ratios
The ratio of vacant jobs to jobless workers has decreased, indicating a shift in the labor market's dynamics. While still relatively tight, the market is becoming less intensely competitive for workers than it was previously
Changes in Voluntary Quits
The rate of voluntary quits has decreased, suggesting that workers are becoming less inclined to leave their current jobs. This could indicate increased caution among workers due to economic uncertainty, or increased job satisfaction.

Looking Ahead In Q2

Tariffs will continue to impact labor market
While currently low, we anticipate the unemployment rate will gradually increase in Q2. However, this increase is expected to remain within a relatively narrow and historically healthy range.
Federal Reserve Actions
If the Fed maintains or increases interest rates to combat inflation, it could lead to a slowdown in economic growth and potentially higher unemployment. Conversely, if the Fed begins to lower rates, it could stimulate growth and keep unemployment lower.
The Rise of Contract and Temporary Work
An increase in contract and temporary hiring suggests that businesses may be adopting a more flexible approach to staffing, possibly due to economic uncertainty. This also shows that the "quality" of jobs, may be changing.

Breaking it down Further

Despite mounting economic and geopolitical uncertainty, the national labor market notched another month of decent job gains and low unemployment. But there’s also potential trouble brewing beneath the surface of this report. Inflation remains stubbornly high and may yet climb higher. A rapid reversal in federal government hiring is showing signs of trickling down into state and local government hiring. And it remains uncomfortably difficult for unemployed people who want a job to quickly find one.

All eyes will likely be on federal employment, which officially fell by 10,000 in February. But the total reduction in federal employment was likely even larger last month, given the timing of data collection that happened towards the beginning of last month. Federal employment (minus post office workers) added an average of 6,400 jobs per month between July 2022 and March 2024, slowing to roughly 3,000/month towards the end of last year and then falling off a cliff last month. This federal slowdown is also showing signs of trickling down into state and local government hiring. Local government employment gains have fallen from an average of 36,000 jobs added per month between December 2023 and February 2024, to 18,000 in the past three months.

Going forward, the full impacts of all the new policies, proposals, and abrupt reversals that are the hallmarks of this administration will begin to shape the official statistics — good, bad, or indifferent. The market’s ability to maintain its “business as usual” momentum will be tested and the anticipated soft economic landing continues to hang in the balance.

The unemployment rate measures the percentage of the labor force that is currently without a job. The national unemployment rate has remained steady throughout 2023 and now into 2024, fluctuating between 3.7% and 4.1%.

U-3 unemployment rate is the most commonly reported rate in the United States, representing the number of unemployed people actively seeking a job. The U-6 rate covers discouraged, underemployed, and unemployed workers in the country.

How will the recent natural disasters affect the unemployment rate?

What is the current unemployment duration?

Will the federal job cuts impact people claiming unemployment benefits?

How optimistic are economists about the labor market in the coming months?

Employment

In Brief: October’s largest payroll losses were in the Manufacturing and Professional & Business Services sectors. Professional & Business Services fully recovered its loss in November (+3,000 over the last two months), but Manufacturing will have a longer path to regaining its jobs (-26,000 over the same period).
The Big Picture: Private Education & Health Services and the Public sectors in November maintained the high growth we have seen over the last year and look to remain the primary job generators in the labor market heading into next year.
Diving in: Despite mounting economic and geopolitical uncertainty, the national labor market notched another month of decent job gains and low unemployment. But there’s also potential trouble brewing beneath the surface of this report. Inflation remains stubbornly high and may yet climb higher. A rapid reversal in federal government hiring is showing signs of trickling down into state and local government hiring. And it remains uncomfortably difficult for unemployed people who want a job to quickly find one.

All eyes will likely be on federal employment, which officially fell by 10,000 in February. But the total reduction in federal employment was likely even larger last month, given the timing of data collection that happened towards the beginning of last month. Federal employment (minus post office workers) added an average of 6,400 jobs per month between July 2022 and March 2024, slowing to roughly 3,000/month towards the end of last year and then falling off a cliff last month. This federal slowdown is also showing signs of trickling down into state and local government hiring. Local government employment gains have fallen from an average of 36,000 jobs added per month between December 2023 and February 2024, to 18,000 in the past three months.

Going forward, the full impacts of all the new policies, proposals, and abrupt reversals that are the hallmarks of this administration will begin to shape the official statistics — good, bad, or indifferent. The market’s ability to maintain its “business as usual” momentum will be tested and the anticipated soft economic landing continues to hang in the balance.

Unemployment

In Brief:
What Does This Mean?: An increasing unemployment rate (both U-3 & U-6) with a declining labor force participation rate is a worrying combination. It indicates that some who were previously looking for work have become discouraged and stopped, but even those who have remained in the labor force are finding it more difficult to be employed. This may be another symptom of the hurricanes as those who previously declared temporary unemployment later permanently left their jobs, and some of them may not have begun searching for new jobs yet.

Key Employment Insights

Impact of California's Wildfires
California lost 54,000 jobs in Q1 compared to its 2-year average of gaining 26,000 jobs per quarter. Much of this was likely caused by the devastating wildfires in Southern California in January that the state continues to recover from.
Federal cuts cause sharp decline in jobs in D.C.
The District of Colombia had the most dramatic job loss relative to its usual pace of job creation, declining by 2,500 instead of the typical increase of 640. This drop is largely due to cuts in the federal workforce. Similarly, Virginia and Maryland, which have a large number of federal employees, finished the quarter well below their recent average.
Employment growth in Oregon & Ohio surge
Oregon and Ohio experienced the highest job growth in Q1 and are the only two states to create more than twice the number of jobs they averaged over the past two years.

What We're Forecasting

Tariffs will continue to impact labor market
Based on preliminary data from the BLS, the ongoing tariff war could result in the loss of nearly 100,000 jobs across the US in Q2 alone. As businesses continue to struggle with prices, we could expect an increase in layoffs to compensate for the higher overhead costs.
New legislation is expected to boost US employment
New legislation proposed by the Trump administration to abolish taxes could result in a significant boost to the U.S. labor market, potentially adding one million jobs across the country.
Cutting interest rates could lead to recession
If the Federal Reserve fails to achieve a soft landing in the coming months, economists predict it might send the country into a recession and result in the loss of thousands of jobs.

Key Industry Insights

Payroll on the decline
October’s largest payroll losses were in the Manufacturing and Professional & Business Services sectors. [Example Headline & Text]
Federal cuts leads to sharp decline in jobs
The administration's initial actions to reduce the size of the federal workforce resulted in the loss of 12,000 jobs during the first quarter. [Example Headline & Text]
The Big Picture: Private Education & Health Services
and the Public sectors in Q1 2025 maintained the high growth we have seen over the last year and look to remain the primary job generators in the labor market heading into next year. [Example Headline & Text]

What We're Forecasting

Tariffs will continue to impact labor market
The uncertainty of the current tariff landscape is expected to cause countless industries to make significant job cuts across the board. [Example Headline & Text]
New legislation is expected to boost US employment
The government sector is expected to fully recovered its loss in Q1 2025, (+3,000 over the last two months), but Manufacturing will have a longer path to regaining its jobs (-26,000 over the same period). [Example Headline & Text]
Edu. job cuts could cause a recession
The decline of Private Education & Health Services and the Public sectors in Q1 2025, cause result in a recession, according to the Wall Street Journal economists [Example Headline & Text]

Stock Up:

Mining and Logging Sector: In the first quarter of 2025, we've seen the mining and logging sector surge, adding one billion jobs. Specifically, the oil & gas extraction (+300,000) and the coal mining (+200,000) industries saw the largest increase in job openings since the new administration took office. This is the result of the administration large investment to maximize the use of the country's domestic resources, such as coal and oil. We can expect to see a steady increase in the coming months as well. [Example Headline & Text]
Manufacturing: The manufacturing sector (+600,000) significantly increased in Q1 2025 due to the recent rise in companies continueing to invest in manufacturing their goods in the US. The semiconductor and electronic components (+500,000) industry saw the largest increase in jobs due to the high tariffs placed on China. Wood products (+35,000) also saw a substantial rise as a result of recent research that shows wooden products are vastly superiors to metal ones. [Example Headline & Text]

Leisure & Hospitality: Employment in Leisure & Hospitality (+70,000) increased sharply in the first quarter. Food services and drinking places (restaurants and bars) continues its run of strong hiring, making up 28,900 jobs created in Leisure & Hospitality for Q1. This is due to XYZ. [Example Headline & Text]

Stock Down:

Government Sector: The administration's initial actions to reduce the size of the federal workforce resulted in the loss of 12,000 jobs during the first quarter. While it is uncertain whether this pace of cuts will continue in the foreseeable future, there is potential for more employees to accept buyout agreements. Additionally, the administration has suggested the possibility of closing down operations of the Department of Education that are not explicitly mandated by federal law. [Can you add in more data/detail about the job losses so it's different from Labor Market Overview Section]
The Retail Sector: The retail sector appears to be reacting swiftly to the current tariff environment, with retail trade experiencing a 12.5% drop (approximately 80,000) in job openings during the first quarter. It is atypical for price increases resulting from supply disruptions to affect retail job openings before impacting manufacturing jobs; however, this scenario is plausible. [Can you add in more data/detail about the job losses so it's different from Labor Market Overview Section]

Construction Sector: Similar to the retail sector, construction saw a sharp decline in job openings (-800,000) due to the current tariff environment. As the cost of materials continues to grow, we can expect construction to slow down in the U.S., which could result in the loss of even more jobs. [Example Headline & Text]

Leisure and Hospitality: Employment rose by 28,000, slightly above the sector’s average monthly gain over the past two years. Growth was led by the Arts, Entertainment, and Recreation subsector, particularly Amusement, Gambling, and Recreation industries (+12,700), which helped offset weaker-than-average hiring in Accommodation and Food Services.
Other Services: Employment increased by 12,000, above the 24-month average. The bulk of the gain came from Repair and Maintenance (+9,900).
Private Education and Health Services: Employment increased by 46,000, a solid gain, though still below the sector’s average monthly pace over the past two years. It remains a driver of job growth

Key Industry Insights

Federal cuts leads to decline in jobs
The administration's recent initiatives aimed at downsizing the federal workforce resulted in a significant loss of approximately 12,000 jobs during the first quarter. This reduction has raised concerns about the potential for continued job cuts in the coming months. As a response to the shifting employment landscape, many federal employees may begin to explore buyout agreements. This trend could further impact the overall size and effectiveness of the workforce, leaving many to speculate on the long-term consequences for federal services and operations.
Trade, Transportation & Utilities sector outpaces expectations
The Trade, Transportation & Utilities sector produced impressive job increases during the first quarter, expanding by 123,000 and far outpacing the 25,000 quarterly average over the previous two years. This is perhaps the indirect result of tariff uncertainty, leading businesses to hire employees to help them revamp their supply chains.
Retail sector reacts swiftly to rise in tariffs
The retail sector is rapidly adjusting to the challenges posed by the current tariff environment. This shift has led to a significant 12.5% decrease in job openings, equating to approximately 80,000 positions, during the first quarter alone. This downturn reflects broader economic uncertainties and heightened operational costs driven by the changing import duties, prompting many retailers to reassess their hiring strategies and workforce needs.

Trade, Transportation & Utilities: Employment rose by just 2,000, well below the 24-month average. Losses in Wholesale Trade (–11,700) and below-average gains in Retail Trade (+10,500) were the main drags. These results may reflect reduced demand from retailers and manufacturers as well as adjustments in inventory and supply chain management.
Manufacturing: Employment declined by 12,000, driven primarily by a 14,500-job loss in Transportation Equipment manufacturing. This subsector can be sensitive to shifts in both domestic demand and global supply chains, so the weakness could point to rising input costs, or ongoing supply disruptions.
Government: Employment fell by 16,000, extending its recent downward trend. Losses were concentrated in Federal (–15,000) and State (–13,000) subsectors, only partly offset by gains in Local Government (+12,000).

Breaking it Down Further

The tariffs introduced at the beginning of the quarter have not had the detrimental impact that was initially feared. Several factors contribute to this. Mainly, the harshest tariffs were either canceled or delayed, prompting companies in trade-sensitive industries to prepare for the policy change by stockpiling intermediate goods and inputs, along with implementing other protective measures to insulate themselves. Despite the imposition of new or increased tariffs—particularly on Chinese imports and select industrial goods—employment levels within these sectors have remained relatively stable. This suggests that, so far, companies have either absorbed increased input costs, relied on diversified supply chains, or passed on limited costs to consumers without significantly altering their hiring practices.

The partial tariff removals over the last three months and the resilient behavior of key industries do not necessarily indicate that the labor market has successfully moved past this issue. Tariff policies may take longer to affect the labor market than anticipated, meaning the tariff policy changes that were taken earlier in the year are now working their way through the system. It may require longer-lasting price increases that lead households to pull back on spending before the labor market falters. The June consumer price index reading indicates that might be occurring with inflation 0.3% which outpaced wage gains. Additionally, these policy adjustments are not a disavowal of tariffs. They are short-term relief actions with the live possibility that the policies could be returned and even ratcheted up at a later date.

A cooldown in Private Education & Health Services was expected, although the exact timing remained uncertain. This sector, along with the government sector, contributed notably to the job growth in 2024. Both rely heavily on public sector spending, but while federal government layoffs were announced and therefore easier to predict, the reaction of the education and health industries to new policies was harder to pin down on a quarterly basis. Historically, these two sectors have accounted for 25% of all employment growth, and in the second quarter, they may be gradually returning to that former level.

The U.S. labor market continues to show surprising durability in the face of policy uncertainty and shifting economic conditions. While risks related to tariffs, inflation, and sector-specific slowdowns remain, the steady pace of job creation gives us hope the labor market is in transition rather than retreat. As the second half of the year unfolds, attention will center on whether price increases creep their way into employment and real wage growth.

Geographic Solutions aggregates and analyzes the following proprietary employment metrics from internal data on the number of advertised job openings posted on Geographic Solutions' state client sites.

Health Care and Social Assistance

According to Geographic Solutions’ online advertised job postings, Education Services saw an increase of 28,104 positions. While this exceeds the average growth seen in previous quarters, this aligns with hiring expectations as schools list positions in Q2 and Q3 for the upcoming school year.

Education Services

Although job postings in this industry dropped by 32,383 compared to the previous quarter, this decrease is significantly lower than declines observed in other quarters over the past two years. Combined with June 2025 BLS employment information from CES, this continues to support the theory that employment in this industry is stabilizing.

Information Technology

Geographic Solutions’ Job postings for the Information industry increased by 5,482 listings, rather than decreasing as expected. This may signal that employment growth in this industry will continue, which aligns with the BLS employment data.

Professional, Scientific, and Technical Services

Geographic Solutions advertised job postings in this sector declined by 15,043, representing a higher-than-average loss compared to previous quarterly changes. Policy changes and uncertain funding may be impacting employer decisions to post these positions.

Public Administration

Geographic Solutions’ postings saw a decline of 26,256 listings. The decline in postings, combined with increased employment in the Professional and Business Services series, could indicate that companies are experiencing less turnover than in previous quarters.

Finance and insurance

This category saw a decline of 6,342 postings, an above-average loss compared to previous quarters. Like the previous sector [Professional, Scientific, and Technical Services], the decline in listings coupled with an above average employment performance in the Financial Activities could indicate higher retention rates for companies in this sector, or budget caution in an uncertain economy.

How We Matched Up

Geographic Solutions: Geographic Solutions' expectations of 10,000 jobs were short of the 22,000 jobs added in August. The unemployment rate expectation of 4.2% was just under the 4.3% outcome.
The Wall Street Journal: The Wall Street Journal's expectation of 75,000 jobs being added to the labor market was significantly above what was recorded in the labor market report.
ADP: According to ADP’s latest estimate, the private sector added 54,000 jobs in August, compared to the 38,000 reported by the BLS.

Phillip Sprehe and Dara Sanchez, economists at Geographic Solutions and its subsidiary iQuery, are the driving force behind the Economist Corner's monthly Labor Market Analysis. With Dara's fifteen-plus years of experience in software development and data analysis, and Phillip's extensive background in assessing macroeconomic data and financial markets, they collectively provide unique insights into the labor market by meticulously tracking key indicators and analyzing a variety of internal and public data.

Economist Corner

Key Takeaways

Key Employment Insights

Looking Ahead in Q2

Breaking it Down Further

Employment FAQs

How have the federal job cuts impacted the labor market?

What are the implications of the tariff war from a labor perspective?

Will getting rid of taxes really jump start the labor market?

How optimistic are economists about the labor market in the coming months?

Key Unemployment Insights

Looking Ahead In Q2

Breaking it down Further

Unemployment FAQs

How will the recent natural disasters affect the unemployment rate?

What is the current unemployment duration?

Will the federal job cuts impact people claiming unemployment benefits?

How optimistic are economists about the labor market in the coming months?

Employment

Unemployment

By the Numbers: Employment & Unemployment

Key Employment Insights

What We're Forecasting

State-us Update

Key Industry Insights

What We're Forecasting

Stock Up:

Stock Down:

Key Industry Insights

Breaking it Down Further

Quarterly Performance

Two-Year Quarterly Average

Quarterly Performance

Two-Year Quarterly Average

Health Care and Social Assistance

Education Services

Information Technology

Professional, Scientific, and Technical Services

Public Administration

Finance and insurance

How We Matched Up

Previous Monthly Reports