America's job market is collapsing

There's something strange going on with the American economy I want to show you. On one hand, the stock market is soaring. And not just stocks. Gold, bonds, GDP. The economy is booming.

Stock market has been rising.

Americans have more money in stocks than ever before.

Another record high. Not bad, huh?

The stock market has gained almost $3 trillion in value since the election.

You smell that?

What is that?

What?

What's that smell? I smell money. So the job market must be good too, right? That's how that works, right?

And hiring has slowed.

Cut tens of thousands of jobs.

Jobs. Job.

Job market. Nobody can find a job. This is a thing called the hiring rate. It's basically how many people, as a share of the total workforce, workforce get hired every month. And you can see it's way down. The last time it was this low was for a hot second in the early pandemic, but the last time it was sustained at this level was at

the low point of the global financial crisis that melted down the entire world. America is in the middle of a huge jobs crisis. If you have a job, you're probably okay and you might not even know that anything is wrong. But if you find yourself needing to get a job, it is like the dust bowl out there. But remember, judging by the stock market, the economy is good. Like, let's put that chart we just looked at, hiring rate, on top of a chart of the stock market.

I just put this together on the Fed website. It's nothing fancy. That bottom line is the hiring rate, and top is the stock market. It's weird, right? So what's going on here? It makes more sense if you see what happens if you actually go online and try to find a job. Imagine I'm a new graduate or I move cities

or I got laid off, whatever it is, something came up, I need a job. LinkedIn, what do you got for me? All right, let's try searching writer job. I'm a writer. Search writer. And let's look New York City metropolitan area. What do we got? Here we go. Here we go. Okay. Condé Nast. Writer. That's good.

95,000. That could be better. Posted two weeks ago. Wow. Over a hundred people applied. Duolingo. Okay, that's kind of fun. $153,000 a year. That's a little low for a big tech company. Posted two days ago. Wow. Over a hundred people applied. LinkedIn stops counting applications after 100 people for whatever reason, I guess to not discourage you. So I apply for this job. I am up against at least 100 other people and maybe a lot more than 100 people, which means my odds of getting it statistically are worse than my odds of getting into Harvard. So, okay, let's look for a lower salary. Maybe that will help cut down on this competitiveness

a little bit. Games associate writer at the New York Times, only a week ago, over a hundred people applied. Okay, you know what? We're gonna try a job that's a little bit more in demand. We're gonna try marketing. It's not what I went to school for, but times are tough.

All right, what do we got?

Okay, grocery store in New Jersey, associates category manager. I don't know what that is. It doesn't list a salary was posted a week ago and over 100 people have applied. Okay, Google posted one day ago over 100 people applied. This is a nightmare. There's nothing out there. I need to settle. I need a job. I'm going to search barista. I'm not too proud. The thing is, you know, I need healthcare. If nothing else, I need healthcare. I'm going to filter by medical insurance benefits.

Whoa, look at that. It cuts down from 440 results to only 18 with it. Okay, sorry guys, I didn't realize it was super greedy that I wanted healthcare. What do we have? Barista at Joe and the Juice six days ago, 50 people.

So yeah, like I said, brutal out there. Okay, this is the crisis. There are no jobs, very few jobs, and so many people looking for jobs, which means every listing out there gets a zillion qualified applicants. You could spend all day every day firing off applications for jobs you're overqualified for and still never get an interview.

And that is exactly the trap that millions of people are stuck in right now. And that number is growing every week, even though the economy is supposedly good right now. Well, we are going to get to the bottom of why this is happening, why you and so many others can't find a job. Because this turns out to be much bigger than just jobs.

There is a deeper thing here that is affecting everyone, whether you're looking for a job or not, and in ways you are probably not aware of, that reveal a lot about why our economy isn't working.

Hey everyone, just wanted to cut in here

with a quick heads up that we actually recorded this before the Iran war like melted down the global energy economy. So if you're watching the intro thinking, hey it's weird he's not mentioning the Iran war, that's why. But everything that you're about to hear still applies, still true, actually even more so because these deeper trends that we are about to explore have all been building for months or years and the Iran stuff is just amplifying them. Okay, that's it. Now, the video. This story is eventually going to tell us where this strange,

quiet crisis is taking all of us, what our future looks like. And that means understanding our present, what it means to have an economy that is good and bad at the same time, right? Good in the sense of the numbers going up and bad in the sense of there being no jobs. And we're going to talk about why it has got Trump facing a borderline existential dilemma where he has to choose between jobs on the one hand or some of his highest priorities as president on the other. But first, we've got to answer a more pressing question. Who took the jobs away? This is the US labor market. Each one of these is a job and imagine there are like 160 million cards.

And this is a worker. In a healthy economy, you've always got a few empty jobs and a few people who are looking. Look at that. Another hire. But we're not in a healthy economy, right? So we're going to use all this to show why.

What is it that's taking these jobs away? And it's actually a few things that are all happening at once. So let's start with an obvious one. AI. Everyone is worried about AI displacing human jobs. The truth is, so far, this might be more a worry than a reality though.

This is a study by the Federal Reserve looking into this. And it found that mostly companies aren't adjusting headcount for AI, which is to say cutting jobs. A small proportion of service firms do say they're reducing headcount for AI, but others say they're actually increasing hiring for AI work. So it seems like AI is, so far, not directly displacing a ton of jobs, just a few.

But let's come back to this because there's much more going on here than meets the eye. Okay, another big one. Tariffs.

I'd like to see the chart if you have it. That's tariff charged to the USA, including currency manipulation and trade barriers.

Tariffs were supposed to bring back jobs by forcing factories to relocate to America from places like China and India. Here's Howard Lutnick,

the Trump official in charge of tariffs. Remember the army of millions and millions of human beings screwing in little little screws to make iPhones. That kind of thing is gonna come to America. What tariffs actually did was

force manufacturers already in America, like this TV factory, to shut down, or to move their factories out of the US. According to this industry report on manufacturers leaving the US, 1 in 5 international firms has exited the country since tariffs went up and they're taking those manufacturing jobs with them. The reason that this is happening is because any business needs to import parts and raw

materials. Factories import rivets and rubber and machinery. Construction companies import lumber, tile. Even restaurants import ingredients, you know, tomatoes. About half of US imports are just the stuff that goes into American-made products. And tariffs make all of that more expensive.

So American businesses that might have spent money on hiring now have to spend it on tariffs instead. Or they might even have to close, as many have. Which is how you get this. Job losses in every part of the manufacturing economy.

This is a big one. Tariffs. It's where we start to see how these burdens on the labor market hold back everyone. All of these people who would have gotten that job in engineering or construction except that job no longer exists because of tariffs. Now those people are competing for these remaining jobs. Which means everyone else who is

already looking for a job now is a harder time getting that job that might have been gettable a year ago because there's all of that new competition. Which brings me to another big culprit. Mass government layoffs. Mostly from Elon Musk's doge closing down or gutting agencies last spring.

This is the chainsaw for bureaucracy.

And then also from the government shutdown in the fall. The federal government is the country's biggest employer. But in just a few months last year, that one employer dropped 271,000 jobs. That alone is equivalent to 1 10th of the losses from the entire 2008 global financial crisis. And these pushed out federal workers aren't just in DC,

they're in absolutely every state. And they work in basically every white collar field, which means again, if you're trying to get a job in accounting, sales or marketing or really anything in an office, you are suddenly competing with a few hundred thousand former federal workers who just got displaced from the federal government for that same job. So now it's a lot harder to get this one job because of all of that competition. Just one more that we have to talk about. Look, all you really need to know, I know

this is a big boring white building, all you really need to know is that there's this thing called the Federal Reserve and they set this thing called interest rates. And interest rates determines how much you pay when you borrow money to buy a house, purchase a car, or start a business. Interest rates have been high for a few years now. That's deliberate. They made interest rates high so people would borrow less money and would therefore spend less money, which means there would be less inflation. But the downside is that if someone wants to borrow money now to

start a business or to expand a business, it's more expensive to do that. And as a result, they cannot hire as many people. This is where we need to zoom out because each one of these on their own is bad enough. You see them blocking out jobs so there's fewer jobs and more people competing for the existing jobs. But the real story here is in how these things all interact with one another to create a perfect storm of job suppression. Remember this guy we just saw with Trump?

That's Jerome Powell, the big boss of the Federal Reserve, which sets interest rates. Here he is in December.

If you get away from tariffs, inflation is in the low twos, right? So it's really tariffs

that's causing the most of the inflation overshoot. Tariffs make everything more expensive. That's the main thing that they do. It is a 10 to 20 percent tax. What he's saying is that if it weren't for tariffs, he could cut interest rates, which would let businesses borrow money to hire more people. But he can't because of tariffs. And all of that additional spending equals inflation. So tariffs lock in inflation,

and inflation locks in high interest rates, tariffs, inflation, interest rates. Even if that hurts jobs. I'll let Jerome explain.

The situation is that our two goals are a bit in tension. So interestingly, everyone around the table at the FOMC agrees that inflation is too high and that we want it to come down and agrees that the labor market has softened and that there's further risk. Everyone agrees on that.

Jerome is saying tariffs force us into this impossible situation. He can fight inflation by setting high interest rates, but he can't push rates as high as he'd want because high rates bring inflation down by slowing the economy. And that hurts jobs.

But right now, you've got this difficult balance and there are risks to both sides. There's no risk free path. If we were if we you know. If it was just inflation and the

labor market was just really strong, then rates would be higher. He chose sort of this middle path, but he made clear jobs would have to suffer to keep down inflation from tariffs. We're committed to 2% inflation and we will deliver 2% inflation. So you see how having tariffs and high rates and inflation creates this perfect storm where they all make each other worse and block out a ton of jobs. Let's pause here so I can tell you about something cool I learned from the folks at Henson Shaving. What?

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And it seems like that's true, like the data backs that up. But there is something that that data leaves out. This is a story in the Atlantic last year by the writer Derek Thompson, who argued that AI might be competing with new college graduates or people trying to get their first job, which is why it didn't show up in that report. Like law firms using AI to pick up any extra paralegal work instead of hiring a new paralegal to do it.

Because remember, high interest rates make it too expensive to hire. Or maybe there's a consulting company that hires 5 new people where previously they'd have hired 20, because those 5 can now use AI to do entry-level work more efficiently. Which means instead of AI displacing existing jobs, it might be taking the place of new jobs. Which would help explain why the job market

for new graduates is the worst it's been relative to what it's like for other workers in decades. So we're gonna call this relationship here between interest rates and AI, chapbock workers. And what they're maybe blocking out here are entry-level jobs, the kind of thing you would have gotten just out of school if not for those chatbots.

And the reason that I'm attaching this to interest rates is because the slow economy plus high rates means that companies are usually desperate to save money by using, let's say, one person with a chatbot in place of what would have otherwise been two jobs. Okay, another AI-related thing, and one that you might not think of as deleting jobs, data centers. Meta continuing its massive investments in AI, this time in the form of compute power,

announcing two new major AI data centers.

So here's the deal. Investment in data centers is like the entire US economy right now. Three trillion dollars so far. And partly this is about people thinking that AI is going to be huge, but it's also about tariffs. Tariffs make it harder to turn a profit in industries that import or export, which is like basically every industry.

So what's happening is the entire economy is investing every extra dollar it has that normally would have gone into those healthy industries, into AI, and specifically to a part of the AI economy that is resilient to tariffs because it doesn't involve that much importing or exporting, which is data centers. And specifically to a part of the AI economy, data centers that is resilient to tariffs. So the capital that might have gone towards starting a factory or a call center or a magazine

is going towards giant human-less rows of high-priced processors instead. So I said before, this is posing a big dilemma for Trump, one that is putting a lot of the top priorities of his entire presidency at risk. It has to do with what Trump says is the solution to the jobs crisis.

At the same time, illegal aliens stole American jobs.

This is a speech President Trump gave in December about the economy. Too many immigrants, he said, are crowding out the job market, so we have to get those immigrants out.

For the first time in 50 years we are now seeing reverse migration as migrants go back home leaving more housing and more jobs for Americans. There's a certain intuitive

if ruthless logic to this that if you remove enough foreign-born workers from the labor pool like this, say this is a foreign-born worker, then native-born workers, this guy, can take those jobs for themselves. That's the idea. But are they right about this? Is that actually how this works?

And one way to find out is by looking at what happened to the job market in prior rounds of mass deportations.

Even as we are a nation of immigrants, we're also a nation of laws.

This is President Obama in 2011, announcing what would become a huge deportation campaign.

Deportations of criminals are up 80%.

Remember, this was during the global financial crisis. Job scarcity was a huge issue. So did deportations help? Did more native-born Americans get jobs because of deportations? Well, some economists looked into exactly that question. They analyzed the nearly half a million deportations in the country, which had been rolled out in stages, county by county. And they tried to identify patterns in what happened after these deportations took place. And what they found is that the employment rate among citizens, among native-born Americans,

actually dropped. The reason for this is something called complementarity, which means that jobs mostly done by immigrants complement those mostly done by citizens. Here, we'll use the board to show this. What I'm gonna do is I'm gonna mark off some of these jobs that are just like manual labor jobs. Jobs that are done predominantly by immigrants, like construction. So, okay, bear with me

one second.

Okay, so this over here, this is immigrant labor. These are jobs that are predominantly done by immigrants. Things like manual labor or construction is a really big one. And what happens is that when you take these workers away, let's say because you conduct mass deportations that remove many of them from the country, what you think is going to happen is citizens are going to take those jobs, but actually they don't. Citizens do not take those jobs.

It's because these jobs tend to be strenuous, long hours, dangerous, they give you back and joint problems. Look, I don't blame people for not wanting them. But what it means is that number one, you do not have more jobs going to citizens. And number two, construction firms, companies that predominantly employ immigrants, face big labor shortages, which means that those companies have to cut back. And what that leads to is the loss of complementary jobs. Job over here

held primarily by citizens like foremen, architects, accountants, you know, jobs that are held by native-born workers who might have a college degree, might have a high school degree, because the firms that employ them no longer exist because they've lost those construction workers. Those economists that I mentioned earlier found that in all, mass deportations in any particular area, regardless of where it was, reduced employment among citizens by about three quarters

of one percent wherever those deportations took place. That's more than a million jobs actually that got lost just because of the native-born workers whose employers could no longer employ them because they lost that immigrant labor. To put this another way, the economists found that for every 100 undocumented immigrants kicked out of the labor market, about 12 citizens lost their jobs too.

And economists say that the impact of Trump's deportations could be even more severe by collapsing whole industries like childcare and construction, potentially eliminating the jobs of 2.5 million native-born workers, including over 800,000 just in construction. You work in a field related to construction, anywhere from an architect to a site manager, you could be in big trouble.

So this is all to say that Trump's big solution for the jobs crisis, deportations, is actually not only making it worse, but one of the biggest drivers of joblessness that we have in the country. Same thing goes for tariffs. Remember, tariffs are supposed to turn America into a nation of

millions and millions of human beings screwing in little, little screws to make iPhones.

But what it did instead was cause American businesses to cut back or close. This is what I mean by Trump's dilemma on jobs. Take a look here. Trump's net approval rating on jobs, they go from plus seven

way, way, way down off the screen to minus 30 points. He knows his poll numbers are

dropping hard, largely over the economy. And look, maybe he really believes what he said in December, that the economy is actually good and it's good because of tariffs and deportations. But the truth is that the job is actually good, and it's good because of tariffs and deportations. But the truth is that the job market is down in large part because of those two things. Which means that Trump, whether he knows it or not, is facing a choice between upholding what are two of his highest priorities for his entire presidency, deportations and tariffs,

or giving up on them in order to maybe salvage the job market and therefore his odds of holding onto Congress in the midterm elections later this year. This is the dilemma that could very well decide how the entire second half of his term goes. So far, Trump is holding the course, and as his poll numbers get worse as a result, I don't know. I expect that this question of which course they want to take will get raised within the

White House. This is actually a good moment to take a step back and ask how all of this can represent, like we said at the start of the video, an economy that is both obviously in a lot of ways quite bad, but in others, like the stock market, seemingly, weirdly, pretty good. Let's actually take a look at that stock market. This is the S&P 500, which is roughly synonymous with the stock market. It's crushing it, right? Okay, but look at it this way. That top line is just the top seven tech stocks,

which are going gangbusters, versus that second line on the bottom, the rest of the stock market, which is looking pretty flat. This is the first hint of the larger thing that's going on here. There is all of this economic activity happening right now and there's a lot of people getting rich off it. And not just like tech billionaires, but anybody with a 401k or who put a little money in the market might actually be building quite a nest egg right now off of this booming market. But all of that economic activity is super concentrated in one little sliver of the economy.

AI. And the AI economy is weird because it's a boom that doesn't create any boom towns.

And look, I'm not glorifying the past. Like today's San Jose or Seattle exists because of prior rounds of tech companies. But when it comes to AI, you don't get a Detroit, you don't get a San Jose. What you get are this. For something that is so huge in financial terms, like bigger than every other industry I have mentioned so far, there are very few jobs, and very little effect therefore on the wider economy. And I'm not saying this to beat up on AI.

This thing that's happening is emblematic of the bigger thing going on with the economy. This idea of being two economies right now. A little economy that is doing crazy well, and then another much larger, much weaker economy hiding behind it. But with those two not really touching each other, and this two-track economy thing,

it's actually kind of everywhere right now. Like, companies are expressing optimism about the economy, but consumers are expressing really severe pessimism. And if you break that number down, with that top line showing confidence among people making more than $100,000 a year, you see that the next line for people making less than that used to run about parallel.

Which makes sense. Both exist in the same economy, so they both respond about the same way in terms of optimism and pessimism. Until a few months ago, when those two lines split. Which is really unusual. Actually, hold on a second.

That shape looks familiar. Yeah, this. It looks like a letter K. We saw that shape before. It was here, remember? Hiring rate on the bottom, stock market on the top.

There it is again. Letter K. And it turns out that's what this economy we're in is called. K-shaped. You may have heard this mentioned before. It's a pretty new concept, but it's kind of everywhere right now. An economist named Peter Atwater first used it a few years ago to refer to pandemic lockdowns that cause

the fortunes of one group of people to go up and another group of people to go down. Like a K, right? And this is different from just your classic inequality, the rich doing better than the poor. K-shaped economy is when there's a change in the economy that causes two things that were previously in sync to start to diverge, which we see all over the place now. So why is this happening now? Why today? Atwater says that, among other things, it's from all of this inflation, which is hurting some

people and is actually helping others. Because inflation is making stuff that those people already own, like houses or investments in the stock market, more and more valuable. But it's not just inflation. It's also all of this stuff. Like AI.

Remember we said basically the entire economy now is just investing in AI? This right? Well, there's another K. If you're unlucky enough to work or invest in an industry that is not AI, the dry up in economic activity maybe already feels to you like a recession. Mass government layoffs, remember, that's 250,000 people who lost their jobs, the savings from which went to pay for tax cuts that just benefited the richest 5%.

Another K. And all of this K-shapedness is showing up in other ways too. That AP story from earlier talked about how consumer brands like Coca-Cola are increasingly treating us as operating in just two separate economies. Fancier and fancier stuff for the increasingly well-off, like rich people water, rich people milk, while the rest of us get poverty marketing and low-price mini-cans.

Hey everyone, just one last thing. I wanted to tell you all about a new subscriber-only video series I'm really excited about that we're launching at NewPress called No Dumb Questions. I have always thought that the best questions, the one that leads you to the biggest surprises and the most interesting stories, aren't the esoteric brainy sounding ones, it's the big broad like almost childlike why is this the way it is questions. So every week or two we are going

to post a subscriber only video on NewPress answering a few questions submitted by regular subscribers that do just this. Usually those will be on the news and sometimes they will be on the broader stories behind the news. And in this week's, which is already up, I'm answering a few big questions on the Iran War. Like one that we spent some time on is why has America not been able to win, despite all of its military might? Another is why does Iran have the global reputation it has,

and is that deserved? Another, why have they never followed through on building nuclear weapons? And we get into even more than that. To subscribe, follow the link in the description or scan the QR code on your screen to get access to those answers and lots more as part of this new recurring series, plus other subscriber only features like ad-free videos, behind the scenes content, and more. Hope to see you there. This, this widening division between one world at the top of the K and another world at the bottom

is what our future looks like if these weights on the job market stay in place, because this actually all ties back to the labor market, to jobs drying up. The reason it doesn't feel like the economy is in free fall to most people is because a lot of us are doing well. The top half of that K is why, even with all this turmoil, we are not seeing the kind of business closures or mass layoffs that we did in 2008.

There's enough activity to keep things basically afloat. But this also means that if you were on the bottom half of that K, as many people are, you might feel forgotten precisely because the wider economy looks sorta okay, so people often talk as if it is.

You feel forgotten because nobody seems to be acknowledging what you're experiencing. Still, every week that passes with a stalled labor market, more and more people move from the top part of that K down to the bottom part. Companies are saying they're probably not adding jobs at all this year, so this is going to keep getting slowly, steadily worse. So this is going to keep getting slowly steadily worse But this is really unhealthy people who are looking for a job

Already know that there is a big part of the economy in crisis in a lot of ways They see what's coming for more and more people every week scarcity tense competition Declining wages and long periods of searching without work. And here's the thing, sooner or later, this is everybody. No matter what you do, or how you do it, at some point, eventually, you will need to find a job. Maybe that's because you were laid off, or your company closes, or just because you have to move cities,

Maybe that's because you were laid off, or your company closes, or just because you have to move cities, or you have the bad luck to be 22 and you're graduating college into this economy.