The U.S. labor market slowdown isn’t over—and may worsen, according to Goldman Sachs (GS) economists. Their analysis suggests hiring momentum has weakened more than previously thought, with revisions to earlier data showing payroll growth at levels too low to sustain full employment.
“Our estimate of trend job growth is now clearly below even that low bar of 30,000 per month,” wrote Goldman Sachs analysts David Mericle and Jessica Rindels. They added that future revisions are more likely to be negative, citing weakness in healthcare payrolls, seasonal hiring patterns, and how government models account for new businesses.
The warning comes just days after President Trump criticized the bank on Truth Social for past market calls, labeling them “wrong” and overly negative. Despite a relatively steady unemployment rate near 4%, other labor indicators are flashing warning signs: labor force participation is slipping, job openings are falling, and hiring outside a few key industries has slowed to near zero.
The slowdown carries implications for both the Federal Reserve and the White House. For the Fed, softer payrolls strengthen the case for cutting interest rates to support growth. Goldman Sachs forecasts three quarter-point rate cuts this year—in September, October, and December—with two more possible in 2026 if hiring remains soft. For President Trump, continued cooling could undercut one of his key economic talking points: strong job creation.
Structural shifts are also weighing on employment. Lower immigration means fewer new workers are entering the labor force, while tighter immigration policies may keep some workers from appearing in official data. Yet the slowdown appears broader than immigration alone. Healthcare and education, which had previously added jobs to catch up on pandemic-related understaffing, are no longer driving growth. Technology, manufacturing, and retail may also face labor headwinds in the coming months.
Even modest further softening could have outsized effects. With the labor market near full employment, low turnover may make it harder for unemployed workers and new graduates to enter the workforce, potentially “locking out” segments of labor even without a rise in unemployment. Additional factors—including federal workforce cuts, expiration of temporary protected status for some immigrants, and tighter immigration enforcement—could weigh further on employment.
Investors will be watching closely as Federal Reserve Chair Jerome Powell delivers his key policy speech later this week at the Jackson Hole Economic Symposium, where he is expected to address potential rate cuts in response to labor market trends.
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