The US labor market slows down in 2025, a shock thatextends beyond the United States
- marchesglobauxhec
- 7 days ago
- 4 min read
2025 was a difficult year for the US labor market. The number of jobs created was lower than in 2020, during COVID. This was mainly due to tariffs, new immigration policies, and cuts in government spending.
Key indicators
The unemployment rate in 2025 was 4.2%, compared to 4% in 2024, an increase of 5% over the previous year. On average, the time it took to find a job was 23.1 weeks in 2025 and 21.7 weeks in 2024, representing an increase of 6.4%. In addition, we saw a 5.6% decline in job openings in the market between 2024 and 2025.
The graph shows a gradual increase in the unemployment rate over the course of the year. On average, the United States created 168,000 new jobs per month in 2024, compared to only 49,000 in 2025, representing a huge slowdown in the labor market.
Sectors most affected
The retail sector was the hardest hit, losing 25,000 jobs in December 2025. These jobs were mainly in warehouses, supercenters, food, and beverages.
Given that this sector is predominantly composed of visible minority workers, this trend could be linked to the tightening of U.S. immigration policies toward visible minorities. In addition, the overall unemployment rate increased among visible minorities, reaching 7.5% among Blacks, 4.9% among Hispanics, and 3.6% among Asians, while the unemployment rate among Whites stood at 3.8%.
Healthcare and other industries
The healthcare sector saw an average increase of 34,000 jobs per month in 2025, down from 2024, when approximately 56,000 jobs were created per month.
In contrast, the heavy industry sector, which includes mining, construction, manufacturing, transportation and warehousing, financial activities, and others, experienced little fluctuation.
Macroeconomic analysis
From a macroeconomic perspective, this sharp slowdown in labor force participation poses a risk to the U.S. economy, with the real victim being the recovery period, which, as we emerge from the pandemic, is being replaced by problems of stagnation marked by supply shocks.
Figure 4. Unemployment rate and labor force participation rate in the United States, 2020–June 2025 (in %). Source: S&P Global
The observed link between higher tariffs on imported goods and lower hiring leads us to consider the possibility that companies facing higher import costs may sacrifice their human capital in order to protect their profit margins.
This would further depress wages in companies' production units and fuel household unemployment, which would weaken consumption, by far the main driver of US GDP.
Effects on demand and the risk of recession
Next, businesses become somewhat discouraged from investing, which leads to a reduction in their spending. This accentuates the decline in domestic trade, which can increase the risk of recession.
Weak demand in the United States then works against the growth of its major partners, as well as its foreign trade with other players in global commerce.
Impacts on emerging countries and labor mobility
Many emerging countries are also affected, particularly those where tougher migration policies are reducing the mobility of minority workers.
This is due to prolonged unemployment among migrant workers or a decrease in the flow of migrants settling in developing countries to work. In both cases, the labor force is shrinking, particularly due to the tightening of migration and tax policies in host countries, known as developed countries.
This then has negative effects on a global scale: many sectors of the informal economy are deteriorating, causing a new wave of illegality for millions of workers. This situation highlights the instability of relations between countries and exacerbates the situation of countries for which trade with external actors is already difficult.
Financial consequences and the role of the Fed
On the financial front, the precarious health of the US labor market directly influences the Federal Reserve's monetary policy, creating a wave of uncertainty in global bond markets. An unstable dollar, resulting from a slowing economy, complicates debt management for nations whose borrowings are denominated in US currency.
Conclusion
In short, the results for 2025 show that the slowdown in the US labor market is not just a national issue, but a systemic risk to the stability of global growth, proving once again that the interdependence of markets means that no isolated downturn can occur without major global consequences.
Sarah Ait Siselmi, Coraly Duplessis, Fatine Moumni
Varied sources cited in text including:
