Key economic sectors show weak job growth
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For an economy that's rapidly expanding, the usual drivers of job creation sure aren't carrying their weight.
Why it matters: Anemic job growth in key sectors is a sign that there is more underlying weakness in worker demand than the low unemployment rate might suggest.
- It makes for a weaker starting point, as companies see new opportunities around the corner to use AI to automate their work.
- It's not a new trend: These sectors showed weak job creation or outright job losses for the last couple of years of the Biden administration.
- But it is striking that a GDP surge fueled by data center and AI investment hasn't been enough to generate more robust hiring.
By the numbers: Overall employment is up 0.8% over the 12 months ended in September, but the hiring has been driven in significant part by health care, state and local government, and other less cyclical sectors.
- Manufacturing employment is down 0.7% over the last 12 months. Tariffs are weighing on the sector, but its job losses long predate the Trump trade wars, with year-over-year job losses for more than two years.
- Temporary help employment, which tends to be a volatile indicator underlying growth trends, is down 3%. It has been losing jobs for three consecutive years.
- Two other sectors that tend to correlate with overall economic momentum, transportation and warehousing and wholesale trade, are also adding jobs at rates below that of overall job growth (0.6% and 0.2%, respectively).
Stunning stat: As Bloomberg flagged, two sectors — health care and social assistance, and leisure and hospitality — accounted for more than 100% of net job gains so far in 2025.
- Excluding those sectors, employment dropped by 6,000 jobs in the first nine months of the year.
Zoom out: There's not much reason to think these numbers are driven by AI-related opportunities for companies to increase productivity and rely on fewer human workers, particularly given that the phenomenon isn't new.
- But it is more plausible that seeing such opportunities on the horizon has made companies more reluctant to hire in the absence of overwhelming need.
- BlackRock chief investment officer for global fixed income Rick Rieder wrote in a note after last week's jobs report that "what we think we are seeing now is ... essentially a hiring pause in anticipation of AI."
Of note: A report out Tuesday from the McKinsey Global Institute finds that AI and robotics technologies could, in theory, automate 57% of U.S. work hours.
- "AI will not make most human skills obsolete, but it will change how they are used," the authors find. "As AI takes on common tasks, people will apply their skills in new contexts," they write, such as less time researching and preparing documents and more time framing questions and interpreting results.
The bottom line: Beneath the headline numbers, there is some good reason that attitudes toward the job market are glum. And more change is likely ahead.
