2025 Job Market – Fed Cuts, AI, and Tariff-Driven Chaos

Lots of churn this year...

I know a few people who have been let go due to federal cuts to education - folks who don’t directly work at schools but provide services to them. Federal funding cuts to education (and others), AI automation, and tariffs combined with general chaos (uncertainty) are likely forcing many companies to "pause" and wait it out rather than hire and overextend.

So, good luck to all those seeking a job.


How The Job Market Will Shift In The Second Half Of 2025

Jobs Outlook Dims
Although the job market has stayed resilient so far this year amid the administration's policy upheavals, economists predict cracks could start to show in the latter half of 2025. While most forecasters say a recession is unlikely, their outlooks are clouded by unusually high levels of uncertainty.

While most economists expect job growth to slow this year, they don't necessarily agree on the extent.

For instance, in a survey conducted by the Federal Reserve Bank of Philadelphia in May, forecasters expected the unemployment rate to tick up to 4.5% by the last quarter of the year.1 That would break the unemployment rate's six-month streak of hovering between 4% and 4.2%, a low level by historical standards.

Other forecasters predict Trump's import taxes will have a more severe impact on jobs. Pantheon Macroeconomics, for example, expects the unemployment rate to rise to 4.8% by the end of the year. Pantheon forecasts that the economy will add an average of just 75,000 jobs a month, which would be relatively weak by historical standards. The economy added 139,000 jobs in May, by comparison.

How Bad It Will Get
Some economists anticipate a more worrisome development: That the economy will stop adding jobs every month, breaking its four-and-a-half-year-old streak of growth.

"With labor supply running below 100,000 per month, it wouldn’t take much cyclical softening to get an occasional negative print on monthly job growth," economists at J.P. Morgan, led by Hussein Malik, head of global research, wrote in a commentary. "While we no longer project outright contraction in employment on a quarterly basis, don’t be surprised if we see a minus sign on a monthly reading of payrolls."

Diane Swonk, chief economist at KPMG, was among those who see risks of a significant downturn that could lead to serious unemployment.

"The risk of a recession is still too high for comfort," she wrote in a commentary. "The labor market is starting to look fragile; once employment slips into the red, it tends to do so rapidly and stay there."

However, according to Comerica Bank chief economist Bill Adams, the reduction in immigration could help soften the blow and prevent the unemployment rate from rising too sharply.

"Tighter immigration means fewer new jobs will be needed to keep up with entrants to the labor force," Adams wrote in a note.

He added that while the job market in the second half looks shaky based on recent data, it could turn out better than feared.