The labor markets in many major economies are frozen as uncertainties about trade, taxes and artificial intelligence postpone employment, postpone employment and layoffs, and employees stick to their jobs.
Official data show that employment rose just 0.5% in the US, and only 0.5% and 0.4% in the remaining 0.4% of the G7 economy through July. This is well below the rate seen in 2024.
Instead of cutting staff, businesses appear to be primarily maintaining their workforce, but slowing jobs and clashing with global growth when AI threatens to reshape the labor market and the US President Donald Trump trade war.
According to Simon Macadam, assistant chief economist for consultant capital economists, employment growth is “one of the major weaknesses of the developed economy.”
In the US, employment growth has been stuck mostly over the summer, and in June the world’s largest economy even took over its position.
With the exception of Japan, particularly in the UK, employment growth has slowed for several years across the rest of the G7 economy, with salary employment dropping by about 0.5% over the past year.
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“You’re in a low-paid economy with low employment,” Federal Reserve Chairman Jay Powell said last month. He added that the US economy was in a period of massive change and that businesses wanted to see “how everything shakes.”
Along with employers postponing employment and layoffs, recruiters say they are nervous about candidates moving.
James Hilton, chief financial officer of UK recruitment group Hayes, said the recession in key markets reflects employers’ attention, but also said candidates are worried that if they change jobs, they will lose their hybrid job arrangements protected by post-Covid upswing.
“While companies are taking longer to hire and offer wage increases, candidates are worried about job safety, losing flexible jobs, or facing longer commutes,” he said.
The static labor market is particularly difficult for young people to start their careers, but despite the freeze, there are few signs of widespread unemployment.
Unemployment rates remained record low for most of the eurozone, rising modestly only in the US, UK and Germany. Even in these countries, some employers report sustained labor shortages.
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Central bankers struggle to determine whether the job market is becoming difficult due to weak or change in demand affecting the supply of labor, such as age and health in the workforce, shaking of immigration policies, and changing lifestyle preferences.
In the US, Christopher Waller and Michelle Bowman, two federal governors, who sought to cut fees faster than others, believes there is evidence of substantial weakening. “I’m worried about the labour market being able to enter a volatile phase and there’s a risk that the shock could lean it towards a sudden, serious worsening,” Bowman said last week.
But Austan Ghoolsby, the president of the Chicago federal government, warns that low-paid profits are not necessarily a central bank warning sign. With the unemployment rate still at 4.3%, Ghoulsby said it could reflect Trump’s immigration crackdown and the wave of retiring baby boomers rather than weaker demand.
Data tracked by professional social network LinkedIn depicts consistent images of low churn in the job markets of many advanced economies. Members who recently added new employers to their profiles have now lost less than a fifth of their pre-pandemic rates in the US, UK, Canada and Australia. It’s even lower in France, and it’s down almost 15% in Germany.
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Kory Kantenga, head of economics for the Americas at Linkedin, said many countries still suffer “aftershocks from the pandemic,” unleashed a job frenzy, followed by pulling back as central banks responded to the wave of intrusions and raised interest rates.
In most countries, labor markets are still “normalizing” rather than “predicting a wider economic recession,” McAdam said. He also pointed to a set of country-specific issues, including tax rates in the UK, French political stagnation, the structural challenges that plague German industry, and the impact of tariffs on US distribution and manufacturing: the country’s tax system, and the political challenges of France.
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Stefano Scarpetta, Director of Employment, Labor and Social Affairs at the OECD, said that despite relatively slow growth and high uncertainty over the long term, employment rates remained high and widespread labor shortages are prominent.
One of the main reasons that made employment go, he said, was demographics.
“We know that older workers have a lower mobility. They are more calm and less eager to move geographically. If they have experience but are not formal education, it may be difficult to negotiate a high wage for a new job,” he said.
“All European countries are aging and mobility is affected by aging.”
Data visualization by Amy Bollett and Keith Frey
