It's the strangest job market the U.S. has -2-

"There are a variety of ways that people earn more money. The biggest one is that they gain more experience in their career," he said. "Early in the career, a good chunk of where people are gaining earnings and wages is that they're trying to find the right employer for them that takes advantage of their skills. It's becoming rarer to be able to do that kind of transition."

Because it's more common to switch jobs at age 25 than at 55, the workers most affected by this change are those starting out in their careers, Hershbein said. That means a lot of people are unable to find a way to earn more at a time when the cost of goods and services is increasing.

"The majority of the U.S. consumer base isn't receiving enough in their paycheck to continue their quality of life," said Bachaud of ZipRecruiter.

Why is this happening?

The problem, some economists say, traces back to the tsunami of hiring after the pandemic. "In hindsight, companies probably overhired," said Stahle at Indeed. "They hired so many people back then [that] they don't have a need to hire as many people now."

'As soon as interest rates went up, hiring went down.'Kory Kantenga, LinkedIn

Also contributing to the slowdown in hiring was a cycle of interest-rate increases by the Federal Reserve starting in 2022. Surprised by a postpandemic surge in inflation to a 40-year high, a slow-moving U.S. central bank was forced to jack up borrowing costs to slow the economy and cool down a red-hot labor market. Wages were rising by more than 5% a year - and by an even greater amount for job switchers.

"As soon as interest rates went up, hiring went down," said Kory Kantenga, head of economics for the Americas at LinkedIn. Over a two-year period, the Fed raised its key rate from near zero to more than 5%.

Businesses began to cut expenses aggressively to offset rising borrowing costs, Kantenga said, especially by eliminating jobs often filled by younger white-collar employees or recent college graduates. The Fed cut rates in 2024 and 2025, but in September it raised them again.

Another issue that businesses have faced: The economy has been hit by a series of shocks of the sort that used to come around much more infrequently.

It wasn't just the pandemic. President Donald Trump announced early this year massive new tariffs on goods being imported from every global trading partner and then initiated negotiations over those levies, some of which continue to this day. The Supreme Court struck down Trump's initial tariff approach, resulting in U.S. businesses receiving refunds and new tariffs being implemented.

Trump also launched a war with Iran, which pushed up the prices of crude oil, gasoline and diesel.

At the same time, the artificial-intelligence revolution took off, leaving people to wonder about its impacts on the future of work.

The uncertainty plaguing small and midsized businesses, which create the bulk of jobs in the U.S., has become intense, according to Andy Decker, the CEO of Goodwin Recruiting. His clients have become more cautious about hiring.

"When someone leaves, it's not exactly an immediate replacement. Now it's, 'Do we still need that job?' " Decker said. "The threshold for a hire has gone up a little bit."

The collapse of immigration

Yet all these reasons are insufficient to fully explain the anomaly of the low-hire, low-fire economy, some analysts contend. They insist the chief culprit is something else: an end to the flow into the U.S. economy of new workers from overseas - those who enter legally as well as those coming in illegally.

A net of more than 1 million immigrants arrived in the country each year between 1990 and 2024. Now that flow has stopped. The immigration decline started in 2024 after the issue became a lightning rod in that year's presidential election. President Joe Biden issued executive orders aimed at curbing immigration, and Trump, after taking office for a second term, expanded immigration restrictions even further in 2025 and 2026.

Wendy Edelberg, an economist at the Brookings Institution, thinks there was a net outflow of immigrants from the U.S. in 2025 that is continuing this year. That hasn't been the case in a long time, perhaps not since the Great Depression. Government statistics on that point are cloudy.

Without this immigration, the U.S. is left with an aging workforce and near-zero growth in the labor force, although that dramatic slowdown has been masked by a stable and low unemployment rate.

The unemployment rate is based on the share of people in the labor force looking for work. Americans are used to a low jobless rate being a sign of a healthy labor market where a small share of people are looking for a job, not a market in which the supply of workers is going down.

Because of the shrinking labor market, the number of new jobs needed to hold the unemployment rate constant each month has dropped like a stone - from as many as 150,000 jobs a month in 2023-24 to fewer than 20,000 a month now.

Going forward, negative job growth each month is just as likely as positive growth. Americans who have gotten used to a labor market always expanding are going to be confronted by a new reality.

"If the unemployment rate falls because the labor market is shrinking" and not because fewer people are looking for work, "that's different. It will take people a while to adjust to that," said Laura Ullrich, director of economic research at Indeed.

Instead of hiring an increasing number of native-born workers to replace the lost immigrant workers, businesses have adjusted with a scaled-back workforce, Edelberg said. Meanwhile, fewer immigrants means fewer people spending money, which drives down demand for goods, services - and workers.

The big picture is an economy that, going forward, has "sort of a touch of malaise," said Jason Furman, an economics professor at Harvard who was chief economic adviser to President Barack Obama.

A less energized labor market

Byron Rashed has been looking for work since the beginning of February, an experience he calls "very challenging."

Rashed, who lives in Peoria, Ariz., worked in several senior marketing roles at companies that provide cybersecurity and identity-protection services. He regularly comes across what he calls "ghost listings," job postings that never materialize into a real role. When he does hear back from employers, he's noticed the process takes much longer than when he was last in the job market, some three years ago.

"The time that recruiters get back to you, if it is a real job, is weeks," he said. "Most of us who have been out of work for a lengthy time, we don't have weeks." Rashad recently accepted a contract position, but he's still looking for permanent work.

Ebbing job creation has been widespread throughout the economy, but it's most worrisome in an area known as professional and business services. This category was the biggest job creator in the decade before the pandemic, adding an average of 40,000 jobs a month, government data show. Yet these jobs, which often went to younger college graduates, have fallen by an average of almost 7,000 a month since November 2023.

Beyond this corner of the economy, the overarching malaise in the labor market is expected to persist into 2027. The upheaval during Trump's second term in office spawned by high tariffs, war with Iran, rising oil prices and stubborn inflation is expected to keep a lid on hiring.

Companies are also finding ways to do more with less thanks to AI and other technologies, putting the U.S. on the cusp of what some economists predict will be an extended phase of rising productivity.

Even so, businesses are still only adding workers in dribs and drabs - more than enough to keep the unemployment rate low but still leaving the U.S. with a far less energetic labor market.

The repercussions are discomfiting. Job searches take longer and exact a psychological toll on job seekers.

Levanon contends rapid advances in AI will stunt demand, perhaps permanently, for the sort of white-collar administrative work that used to be the first rung on the ladder for college graduates. These jobs are in fields such as finance, law, accounting and information. The U.S. might end up with a "slowly growing glut of college grads," he said.

By 2040 there could be some 1.2 million fewer workers in the workforce, and as many as 5.6 million fewer jobs, according to a new projection from Indeed's in-house think tank.

Still, there are some pockets of hope.

'The trades - that's where there are a lot of jobs.'Richard Moody, Regions Financial

More young people appear to be gravitating toward trades where jobs may be less threatened by AI. There will always be demand for electricians, plumbers, construction workers and people on factory floors.

"I hear all the time from companies that they can't find people," said Richard Moody, chief economist at Regions Financial. "The No. 1 unfilled job in Alabama is welders. The trades - that's where there are a lot of jobs."

Victoria Bloom, chief economist of the National Association of Manufacturers, said there's newfound interest in good-paying factory jobs that younger people used to shun.

"A lot of people are starting to go back to trade schools," she said. "They are starting to question the value of a four-year degree."

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Manufacturers appear to have turned the corner after three straight years of job losses. They have created jobs for four months in a row for the first time since 2022, and demand for their goods is rising.

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10-29-26 1442ET