The latest economic reports show a surprisingly stable U.S. job market, but there are “cracks in the foundation” that could spell trouble for workers in the coming months, according to Andrew Flowers, chief economist at Appcast, a recruitment marketing provider.
The U.S. added 139,000 jobs in May, beating expectations and down slightly from 147,000 in April, according to new data from the Bureau of Labor Statistics. The unemployment rate held steady at 4.2% while the underemployed rate, or the share of part-time workers who want full-time jobs, remained unchanged at 7.8%.
Looking at the bigger picture, the job market is “treading water” and “worse than what the topline number says,” Flowers tells CNBC Make It. The economy netted an average 144,000 new jobs every month in the last year. That’s the lowest since 2011, excluding the pandemic-era drop, Flowers says .
Meanwhile, the bulk of available positions come from health care, leisure and hospitality, and social assistance. These sectors generally fuel a lot of new work, but tariffs and health-care policies in the Trump administration’s “Big, Beautiful Bill” could limit their growth, Flowers says.
The spending bill, which passed the House and is now under consideration in the Senate, would cut Medicaid spending by $700 billion and make signing up for health plans on the Affordable Care Act marketplaces harder and more expensive.
Federal funding cuts to health care, which has accounted for roughly 30% of new jobs in the past three years, could “kill the golden goose, so to speak,” Flowers says. “Health care has been the one stalwart industry to power job growth.”
Leisure and hospitality work could similarly be in danger as businesses pass the cost of new tariffs on to customers, and consumers pull back on spending, Flowers says.
Tariffs are already “starting to bite,” Flowers adds, pointing to declines in the warehousing and retail jobs that buoyed April job growth. “Going forward, a lot of the eggs are in one basket, which is health care.”
‘The job-finding rate is really slipping’
The job-search experience, meanwhile, remains challenging.
Some 40% of job-seekers are not confident in the number of jobs available today, and nearly a third expect fewer jobs to be available six months from now, according to ZipRecruiter’s latest job-seeker confidence index.
“It’s an insider vs. outsider labor market,” Flowers says. “If you have a job, it’s actually pretty good.” Layoffs are relatively low while the unemployment rate is steady and wage growth is strong. But “the job-finding rate is really slipping” for those on the market, especially for entry-level workers getting their first jobs out of high school or college, Flowers says.
Growth is weak around knowledge-worker jobs in finance, marketing, sales and software development, while the professional and business services sector sheds jobs, Flowers says.
‘We’ve told young people in this country for decades, ‘Go to college.’ And they did,” Flowers says. “Now all the jobs they want, whether it’s in tech, marketing, sales, banking or for the federal government, those are all the weakest areas.”
“We’re on this collision course where young people are going to face a harder time getting the jobs that they wanted, but all the blue-collar jobs are going to be very hard to fill,” Flowers says.
Young people are going to face a harder time getting the jobs that they wanted.
Andrew Flowers
chief economist at Appcast
Overall, the U.S. economy has contracted over the last six weeks, as shown in declining business growth, higher prices and slower hiring, according to a new Federal Reserve report.
“All Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions,” according to the report. It noted hiring was “little changed” and “flat” in some districts where candidate pools are growing, but turnover remains stubbornly low.
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