"The challenging U.S. labor market is entering a new normal, according to Goldman Sachs economists David Mericle and Pierfrancesco Mei, who tackled the phenomenon of "jobless growth" in an October 13 note. It resonates with what Federal Reserve chair Jerome Powell memorably described in September as a " low-hire, low-fire " labor market and the fact that, for some reason, "kids coming out of college and younger people, minorities, are having a hard time finding jobs.""
"" The modest job growth alongside robust GDP growth seen recently is likely to be normal to some degree in the years ahead," Mei and Mericle wrote, adding that they expect the great majority of growth to come from solid productivity growth boosted by advances in artificial intelligence (AI), "with only a modest contribution from labor supply growth due to population aging and lower immigration.""
"The key question is whether the trend of jobless growth will continue and, well, the era of " job hugging " looks likely to persist. In an ominous note, the economists cite the track record of how big labor shifts tend to play out: "History also suggests that the full consequences of AI for the labor market might not become apparent until a recession hits.""
U.S. economic output continues to expand while monthly payroll growth lags well behind historical recovery averages, creating a gap between GDP and employment. Entry-level hiring has weakened, making job finding especially difficult for recent graduates, younger workers, and minorities. Most future output gains are expected to come from productivity improvements driven largely by rapid AI adoption. Demographic headwinds such as population aging and lower immigration limit labor supply contributions. The labor market shows a "low-hire, low-fire" and "job hugging" dynamic that may persist, and significant labor-market effects from AI could surface more clearly during a recession.
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