Data for Q3 2025 showed that the growth of the economy reached its strongest level for two years, expanding at a rate of 4.3%, up from 3.8% during the quarter prior.
Despite well-documented fears driven by major changes to the trade outlook for the United States, as well as sticky inflation, cuts to government spending, and a widespread crackdown on immigration, the performance of the economy in the United States appears to be going from strength to strength.
While President Trump’s bold policies have led to swings in performance in certain areas, such as imports and exports, the underlying economy has maintained a consistent level of outperformance.
Underlining the strong outlook in the US, the S&P 500 index has continued to break new ground in recent months, thanks largely to the ongoing AI boom on Wall Street. The index, which comprises the 500 most valuable stocks in the United States, has rebounded more than 36% from April 2025 lows and briefly breached 7,000 for the first time in its history in recent days.
This newfound wave of optimism has prompted the likes of Goldman Sachs to raise its forecast for US GDP growth to 2.5% in 2026, far exceeding the consensus estimate of 2.1%.
However, Goldman Sachs analysts stopped short of spreading the same strong outlook for the jobs market, opting to forecast unemployment rates to stabilize at 4.5% while citing several risks.
Notably, the analysts suggested that the starting point for job growth is narrow, while vacancies have been forced lower by employers seeking to adopt AI as a means of reducing labor costs.
US employers added just 22,000 jobs in January 2026, undershooting expectations and pointing to a deeper slowdown in the labor market to kick off the new year.
Inside the Hiring Slowdown
There are stark warning signs over job market trends in the United States, with just 49,000 new jobs added per month throughout 2025. This represents a significant drop from the 168,000 added on average in 2024 and highlights the level of caution being undertaken by employers.
White-collar sectors like tech and professional services have seen the biggest shortcomings in terms of job creation, while growth is largely isolated to healthcare and social assistance.
Another key cause for concern is that key areas for new roles appear to be focused on essential positions or ‘unicorn’ talent, leaving many entry-level workers struggling to find steady employment.
Around 76% of employers in the US reported that they hired the same number of entry-level employees in 2025 as the year before or fewer, meaning that the development of fresh talent domestically could suffer from a lack of appropriate experience or upskilling initiatives in a way that may increase talent shortages for key roles.
Uncertainty Hampers Optimism
Although the economic outlook for the US appears to be improving, employers are less convinced that the time is right to scale their workforce.
Policy uncertainty regarding tariffs, strict immigration policies, and supply chain disruptions has presented a long-term business planning problem across many sectors in the United States, leaving more employers waiting on the sidelines for solid indications to continue with their growth strategies.
Artificial intelligence has also brought widespread disruption to the job market, with companies diverting capital towards AI tools rather than expanding human headcount as a means of improving productivity.
Goldman Sachs data suggests that AI companies could invest more than $500 billion in the technology this year, while the volume of companies citing their use of AI as a cause for job cuts rose to 55,000 in 2025, more than 12 times the number of layoffs attributed to AI adoption just two years earlier.
According to research from Remote People, fears among employees about the prospect of AI taking their jobs are particularly high in smaller states by population, with Wyoming, Vermont, and Alaska leading the way in online searches related to AI job loss.
Although the impact of AI adoption has been more disruptive for tech-heavy California companies, searches per 100,000 about AI job loss reached 5.1 in Wyoming, with Vermont, Alaska, Delaware, North Dakota, Colorado, Hawaii, New Hampshire, and South Dakota all ranking about 3 per 100,000.
Catching Up to Economic Growth
Despite fears over the impact of AI and its threats to the future of employees in white-collar jobs in the US, the World Economic Forum (WEF) expects artificial intelligence to ultimately create more roles than it displaces.
Forecasts from WEF suggest that the AI boom will create 170 million new jobs by 2030, while displacing around 92 million. This trend would be felt heavily in the United States, with its strong economic lead on AI infrastructure and development, and would form a catalyst for major upskilling initiatives in the years ahead.
J.P. Morgan analysts take a similarly positive tone, anticipating that the US labor market could improve in the second half of 2026 thanks to the impact of tax cuts and Federal Reserve interest rate reductions.
Looking Ahead
Although it’s difficult to chart the long-term path of the US jobs market, the domestic economic outlook continues to defy expectations.
Looking ahead, if employers can overcome their uncertainty about how to implement AI tools, we could see recruitment drives pick up as decision-makers move with greater certainty following a long period of geopolitical and technological disruption.
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