Demand for labor in the USA has fallen to its lowest level in 14 months - outlook for the end of the year

The U.S. labor market has shown clear signs of weakening, with job demand reaching its lowest level in fourteen months. Data released by the Department of Labor in early January confirms that the American job market is entering a new phase of uncertainty, where both employers and workers are awaiting clarity on political and economic conditions.

Job Demand at a Historic Low

The number of available job openings decreased to 7.146 million at the end of November — the lowest since September 2024. This represents a drop of 303,000 positions compared to the previous month. The ratio of job openings to unemployed workers stood at 0.91 — the lowest since March 2021. The demand for labor, which traditionally rebounds quickly during economic recoveries, is now showing a sustained downward trend.

Economists at Barclays point out that the JOLTS (Job Openings and Labor Turnover Survey) data immediately sent a clear signal: demand for labor is weakening, and the labor market conditions are being tested in real terms. Marc Giannoni, head of the bank’s economics team, emphasizes that the situation does not yet indicate a dramatic deterioration but notes the deepening trend.

Traditional Sectors Feel the Greatest Constraints

The hospitality and food service sector suffered the biggest losses — vacancies shrank by 148,000 jobs. Healthcare and social assistance, which recently drove employment growth, reported a decline of 66,000 openings. Transportation, warehousing, and public services had only 108,000 open positions.

In the public sector, the number of openings decreased by 89,000, mainly at the state and local government levels. The only clear exception was retail, where vacancies increased by 121,000 — most likely due to preparations for the holiday season. The construction sector saw an increase of 90,000 openings.

Political Uncertainty and Innovative Threats

The declining demand for labor is primarily linked to uncertainty related to trade policies. President Donald Trump announced broad global tariffs, and the Supreme Court was expected to rule on their legality. This political and economic ambivalence is forcing employers to adopt a cautious stance — instead of expanding employment, they prefer to wait for clarity.

Additionally, the integration of artificial intelligence into an increasing number of roles reduces the need for traditional workers. Economists argue that the labor market faces structural challenges, not just cyclical weakness. Uncertainty about these long-term trends further discourages companies from hiring.

Moderate Layoffs but Growing Warning Signs

The number of layoffs decreased by 163,000 to 1.687 million, remaining at historically low levels. However, voluntary separations increased by 188,000 to 3.161 million. Sarah House of Wells Fargo notes that the low voluntary turnover rate — at 2.0 percent — creates risks: employers seeking to reduce staffing may be forced to lay off workers instead of relying on natural attrition.

The situation described as “no hiring, no firing” — where companies are neither expanding nor reducing their workforce — indicates deep market uncertainty. This outlook has strengthened economists’ belief that the Federal Reserve will keep interest rates unchanged during the transitional period.

Outlook for the Last Quarter

It is expected that the unemployment rate fell to 4.5 percent in December, down from a four-year high of 4.6 percent in November. Data from the Institute for Supply Management showed some signs of recovery — the services sector PMI rose to 54.4 in December, and the employment index in services rebounded to 52.0 after six months of declines.

Ben Ayers of Nationwide predicts that steady and consistent economic growth should keep the services sector in a solid expansion phase. However, the key indicator to watch in the coming months will be labor demand. Tax cuts and reduced trade policy uncertainty could serve as catalysts for future labor market recovery, but for now, we remain in a period of waiting and caution.