Why Employers Aren't Hiring Anymore

A Goldman Sachs analysis reveals a significant slowdown in U.S. job growth, with economists attributing a reduction of 100,000 jobs per month primarily to President Trump's immigration restrictions, federal workforce cutbacks, and economic uncertainty driven by tariff policies. Artificial intelligence adoption also contributed a smaller 10,000 monthly reduction. This deceleration, exemplified by only 22,000 new jobs in August, is a critical factor influencing the Federal Reserve's ongoing decisions regarding interest rate cuts to stimulate the economy.

Analysis

The U.S. economy is experiencing a significant deceleration in job growth, with August seeing only 22,000 new jobs, a sharp decline from the prior 12-month average of 147,000. Goldman Sachs economists estimate current monthly job growth at approximately 25,000, well below the 75,000 required to maintain a stable unemployment rate. This trend has led to a "low-hiring, low-firing equilibrium," despite the unemployment rate ticking up to 4.3%.

Goldman Sachs' analysis attributes the primary slowdown to President Trump's economic policies, collectively reducing job growth by an estimated 100,000 per month. Immigration restrictions are cited as the largest factor, cutting 50,000 jobs monthly, followed by federal workforce cutbacks contributing 30,000. Additionally, economic uncertainty stemming from tariff policies, rather than the tariffs themselves, is causing businesses to defer hiring decisions.

Artificial intelligence adoption also plays a measurable, albeit smaller, role, reducing monthly hiring by 10,000. This overall deceleration in the labor market is a critical input for Federal Reserve officials, who cut the fed funds rate in September and are widely expected to implement further quarter-point cuts in upcoming meetings. The Fed aims to stimulate the economy and support job growth, balancing this objective against potential inflation risks.

Key Decisions for Investors

• Monitor upcoming Federal Reserve announcements closely, as continued rate cuts are anticipated to counter the job market slowdown and could impact borrowing costs and economic activity.
• Assess portfolio exposure to sectors sensitive to trade policy uncertainty and immigration restrictions, given their identified impact on hiring trends.
• Consider the long-term implications of AI adoption on labor markets and potential sector-specific disruptions, as it contributes to job growth deceleration.