A weak jobs report for July and steep revisions to prior months indicate a sharp decline in labor demand, raising recession concerns. The data also points to AI’s impact on employment, with college graduates facing higher unemployment rates.
The latest jobs report showed payrolls grew by 73,000, below forecasts of around 100,000. This marks a significant slowdown in hiring, with the average gain over the past three months decreasing to 35,000. JPMorgan economists warned that this trend could signal a recession warning.
While wages and workweeks continue to rise, the firm’s note highlights concerns about job creation slowing down, particularly in the private sector. Hiring has slowed to an average of just 52,000 in the last three months, with sectors outside health and education stagnating.
The lack of signs that immigration policy is driving unwanted separations also suggests business demand for labor has cooled. JPMorgan stated that a decline in labor demand this magnitude is often a precursor to retrenchment.
Despite this slowdown, GDP rebounded more robustly than expected in the second quarter, with growth estimated at 3%. However, the pace of job growth is unlikely to sustain income gains or consumer confidence.
The broader U-6 gauge of unemployment has climbed by 0.4 percentage points this year, while the headline unemployment rate remains relatively stable between 4% and 4.2%.
JPMorgan also warned that AI’s impact on employment cannot be ignored. Payrolls at professional and business services firms have been trending lower, and college-educated workers face higher unemployment rates.
The implications of this trend are significant, with JPMorgan concluding that the Fed is likely to ease monetary policy to address the economic concerns.
Source: https://fortune.com/2025/08/02/jobs-report-recession-warning-labor-demand-economic-outlook-ai-unemployment