How the U.S. Job Market Could Change in 2025

Summary

WSJ What’s News: How the U.S. Job Market Could Change in 2025
Release Date: January 12, 2025
Host: Luke Vargas
Guests: Lauren Weber (Workplace Issues and Employment), Paul Berger (Logistics and Supply Chain)

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Introduction

In the January 12, 2025 episode of WSJ What’s News, host Luke Vargas delves into the evolving landscape of the U.S. labor market. Joined by Wall Street Journal reporters Lauren Weber and Paul Berger, the discussion covers a comprehensive health check of the job market, examining macroeconomic trends, sector-specific challenges, and the influence of emerging technologies such as artificial intelligence (AI) and automation.

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Current State of the U.S. Labor Market

December Jobs Report and Market Cooling
Luke Vargas opens the conversation by referencing the latest December jobs report, which indicated a ramp-up in hiring. However, Lauren Weber points out that the last month of the year often presents an outlier due to holiday hiring surges. She notes, “the job market has cooled off since its red hot moments in 2022 and 2023” (01:51). This cooling trend reflects a broader stabilization after a period of intense growth.

Companies’ Approach Amid Uncertainty
Weber emphasizes the prevailing uncertainty influencing employers' strategies for 2025. Factors contributing to this uncertainty include shifting monetary policies and anticipated changes under the new administration. “There’s a lot of uncertainty... companies are trying to figure out what’s ahead” (01:51). This cautious stance affects decisions on investment, expansion, and hiring.

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Macro Trends Affecting Employment

Monetary Policy and Federal Reserve Actions
The conversation highlights the Federal Reserve's recent actions on interest rates. Weber mentions, “the Fed... have been cutting rates but indicated in December that they were going to slow down those cuts” (02:38). This shift makes employers nervous about borrowing and investing, potentially restraining growth and hiring.

Trade Policies and Immigration Reforms
Paul Berger discusses the significant impact of trade policies under the incoming administration, particularly tariffs and immigration reforms. He states, “Trade... is enormously important... potential tariffs on imports from Mexico could slow investment and hiring” (04:31). Weber adds that historically, tariffs have not effectively created more American jobs, citing research that suggests they are more politically motivated than economically beneficial (04:57).

Consumer Delinquencies and Spending Outlook
Vargas references a report by David Uberti indicating rising delinquencies and defaults among low and middle-income Americans, which could dampen consumer spending. Weber concurs, highlighting that “unemployment is still historically low... but there’s anxiety” (03:03). This anxiety stems from reduced job openings and a sense of job market stagnation among workers.

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Perception vs. Reality in the Job Market

Worker Sentiment and Job Security
Despite low unemployment and historically low layoffs, Weber notes a discrepancy between data and worker sentiment. “People are staying in their jobs longer, which means they feel less confident that they can find another job” (03:03). This sentiment reflects a feeling of being "stuck" in their current positions, even as job openings decline.

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Supply Chain and Labor Dynamics

Impact of Tariffs on Logistics
Berger elaborates on how potential tariffs could disrupt logistics and supply chains. “If Trump were to follow through on tariffs... that could slow investment and hiring” (04:31). Such disruptions would have cascading effects across various sectors reliant on efficient supply chains.

Nearshoring and Manufacturing Labor Shortages
The discussion shifts to the trend of nearshoring—bringing manufacturing closer to the U.S.—which is expected to boost the labor market in the long run. However, Berger highlights significant labor shortages: “about 100,000 person shortfall between the number of positions that were being advertised and the number of jobs that were being filled” (05:25). This gap is exacerbated by fewer Americans willing to take on manufacturing roles.

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Addressing Labor Shortages

Apprenticeship Programs and Re-skilling Initiatives
To combat labor shortages, Berger mentions the rise of apprenticeship programs that combine on-the-job training with classroom education. “Programs where kids... spend days in a factory and days in a classroom, come out with qualifications and a starting salary of $50,000 a year” (07:30). These programs aim to provide viable career paths without the burden of student debt.

Educational System and Workforce Alignment
Weber critiques the educational system's focus on four-year degrees, which may not align with current job market needs. “Too many kids being pushed into four year degrees that don’t necessarily suit them” (07:30). She advocates for more vocational training and skills tailored to existing and future job demands.

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Technological Impact on Employment

AI and Automation Transforming Jobs
Weber discusses the transformative impact of AI on white-collar jobs. “Artificial intelligence can now... automate some of the easier work” (08:21). This shift necessitates higher expertise levels and is leading to job transformations and, in some cases, redundancies.

Employment Numbers and Contractor Effects
The integration of AI doesn't always directly reflect in employment statistics. Weber explains, “companies are letting employment numbers fall through attrition... it will affect vendors or other contractors” (09:25). This indirect impact highlights the broader supply chain effects of technological advancements.

Dock Workers and Automation Concerns
Berger brings attention to the fears among dock workers regarding automation. “Dock workers are very worried that [automation] will replace them” (10:25). Labor disputes and walkouts, such as the recent one on the eastern Gulf coast, underscore the tensions between workers and the push for increased automation (10:25).

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Workplace Trends and Employer Practices

Return to Office vs. Remote Work
Weber highlights the ongoing debate over remote work versus returning to office settings. “Amazon recalled all of their office workers back five days a week... will other employers follow suit?” (11:17). While some employees prefer the flexibility of remote work, many employers believe in the productivity gains from in-person collaboration.

Performance Improvement Plans (PIPs)
The use of Performance Improvement Plans (PIPs) is on the rise as companies strive for greater efficiency and profitability. Weber describes PIPs as “a way to document someone’s way out the door” (12:22). These plans are often unpopular among both managers and employees but are seen as necessary tools for maintaining workforce performance standards.

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Future Outlook for the Labor Market

Policy Changes and Their Impacts
Weber anticipates that upcoming policy reviews on legal immigration and labor laws will significantly influence the labor market. “Many programs that allow people to come into the United States to fill jobs... are going to be looked at and reviewed” (11:17). These changes could either alleviate or exacerbate existing labor shortages.

Technological Advancements and Workforce Adaptation
The rapid pace of technological change, particularly in AI and automation, presents both challenges and opportunities. Weber predicts a gradual but impactful shift in employment practices, where technology reshapes job roles and requires continuous workforce adaptation (09:25).

Employer Efficiency and Profit Pressure
With increasing pressure for profitability, employers are likely to continue implementing strategies aimed at enhancing efficiency. This includes stricter performance metrics and more rigorous workforce management practices, which may further strain employer-employee relationships (12:22).

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Conclusion

Luke Vargas wraps up the discussion by acknowledging the multifaceted challenges and dynamics shaping the U.S. labor market in 2025. The interplay between economic policies, technological advancements, and evolving workforce expectations creates a complex environment for employers and employees alike. As the year progresses, the ability of businesses to navigate these changes will be crucial in determining the future trajectory of the job market.

Notable Quotes:

• Lauren Weber (01:51): “There’s a lot of uncertainty... companies are trying to figure out what’s ahead.”
• Lauren Weber (02:38): “The Fed... have been cutting rates but indicated in December that they were going to slow down those cuts.”
• Paul Berger (04:31): “If Trump were to follow through on tariffs... that could slow investment and hiring.”
• Lauren Weber (04:57): “Tariffs... didn’t actually end up leading to the creation of more jobs for Americans.”
• Lauren Weber (03:03): “People are staying in their jobs longer, which means they feel less confident that they can find another job.”
• Paul Berger (05:25): “About 100,000 person shortfall between the number of positions that were being advertised and the number of jobs that were being filled.”
• Lauren Weber (07:30): “Too many kids being pushed into four year degrees that don’t necessarily suit them.”
• Lauren Weber (08:21): “Artificial intelligence can now... automate some of the easier work.”
• Lauren Weber (09:25): “Companies... will affect vendors or other contractors.”
• Paul Berger (10:25): “Dock workers are very worried that [automation] will replace them.”
• Lauren Weber (11:17): “Many programs that allow people to come into the United States to fill jobs... are going to be looked at and reviewed.”
• Lauren Weber (12:22): “A way to document someone’s way out the door.”

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Produced by: Charlotte Gartenberg
Supervising Producer: Christina Rocca
Assisted by: Anthony Banci, Scott Salloway, Chris Sinceley

Host: Luke Vargas

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Timestamps

1. [01:51] – Lauren Weber discusses uncertainty in the labor market.
2. [02:38] – Lauren Weber on Federal Reserve rate cuts.
3. [04:31] – Paul Berger on potential tariffs impacting logistics.
4. [04:57] – Lauren Weber on the ineffectiveness of tariffs in job creation.
5. [03:03] – Lauren Weber on worker anxiety despite low unemployment.
6. [05:25] – Paul Berger on labor shortages in manufacturing.
7. [07:30] – Lauren Weber on the education system and vocational training.
8. [08:21] – Lauren Weber on AI automating jobs.
9. [09:25] – Lauren Weber on AI’s indirect effects on contractors.
10. [10:25] – Paul Berger on dock workers' fears of automation.
11. [11:17] – Lauren Weber on immigration policy impacts.
12. [12:22] – Lauren Weber on Performance Improvement Plans (PIPs).

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This detailed summary encapsulates the multifaceted discussion on the U.S. job market's current state and future trajectory, providing valuable insights for listeners and readers alike.

Transcript

[Unknown Speaker]

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[Luke Vargas]

It's Sunday, January 12th. I'm Luke Vargas for the Wall Street Journal and this is what's NEWS Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. And this week we're performing a health check on the US labor market, looking at everything from the macro trends around unemployment to industry specific trends around AI and whether people are trained for the jobs of the future. All right, let's get to it. All right. We've got a lot to get to today, so I want to bring Journal reporters Lauren Weber and Paul Berger into this discussion straight away. Paul covers logistics and the supply chain for us and we will see very soon why decisions companies are making up and down the supply chain are key to understanding the broader labor market. But first, Lauren on I want to start with you given your focus on workplace issues and employment, given that we have just had the latest jobs report for December. The report showed hiring ramping up, though the last month of the year can be a bit of an outlier given that it includes holiday hiring moves. And bigger picture, the job market has cooled off since its red hot moments in 2022 and 2023. Generally speaking, what is the labor market looking like as the year gets underway and how are companies and employers approaching the new year?

[Lauren Weber]

So we're waiting to see what's going to happen in 2025, not only as longer term trends continue, but also as a new administration comes in. There's a lot of uncertainty. You know, we're seeing a little bit of wait and see as companies and employers try to figure out what's ahead. So the monetary policy from the Fed, they have been cutting rates but indicated in December that they were going to slow down those cuts. So that makes employers a little nervous about to what extent are we going to borrow money, are we going to invest to grow? And then of course, with the new administration has promised tariffs and major changes around immigration policy. These are all things that can really affect how companies forecast what their year ahead is going to look like, whether or not they're going to invest in new projects, where they're going to be able to hire or not hire.

[Luke Vargas]

Got it. And the macro climate looks solid. We had the oecd, for instance, saying in a recent report that they're expecting US Growth to be pretty robust this year, though there are so many variables. For example, our colleague David Uberti was reporting that we have seen a rise in delinquencies and defaults for some Americans that is sort of dimming the spending outlook for low and middle income folks, the type of thing. Right, Lauren, that could change the calculus for employers that you just described.

[Lauren Weber]

Absolutely. And a lot of it is perception. You can look at the hard data and say unemployment is still historically low, layoffs are still historically low, but yet when you talk to people, there's anxiety. People are staying in their jobs longer, which means they feel less confident that they can find another job. Or maybe they're looking and they're not finding jobs. We've seen job openings go down quite a bit. So there's a sense from workers that the job market is simply not as strong as it was before and they're feeling a little stuck.

[Luke Vargas]

All right, lots of things on your radar there. And, Paul, I imagine your focus on employers up and down the supply chain, that's going to be pretty important. They're going to be under the microscope in the next few months, specifically depending on how incoming President Trump ends up executing his trade agenda.

[Paul Berger]

Yeah, that's right. Trade, obviously, is an enormously important issue. It's basically what logistics companies thrive on. And they appear to have been pretty spooked by some of the things that Trump has been threatening to do with regard to tariffs. Even if you're based in the United States, you're dependent on global flows of trade. And if you look at just say, one place like the US Border with Mexico, logistics companies have been investing billions of dollars in warehousing, trucking, and rail links along the border because trade there has been growing at a pretty rapid clip in the last few years. If Trump were to follow through on some of his threats of pretty significant tariffs on, for example, imports from Mexico, that could slow investment and, of course, slow hiring.

[Lauren Weber]

Actually, to add on the tariffs, part of the reason why Trump wants to have these tariffs is the idea is to create American jobs and retain American jobs. And there's a research paper done by economists looking at the tariffs from the first Trump administration. What they found was that the tariffs were a politically effective strategy, meaning it was a message that Americans really responded to and liked, but they didn't actually end up leading to the creation of more jobs for Americans.

[Luke Vargas]

All right, well, speaking of jobs for Americans, Paul, I know another factor here is that US Factories are expecting a near shoring boom. I imagine that could be good for them and the broader US labor market in the long run if more manufacturing comes closer to the US but as you heard in some of your recent reporting, it sounds like a number of businesses are struggling to fill positions now. Kind of evidence of a mismatch between their hiring needs and, and the labor supply. One that could maybe only intensify.

[Paul Berger]

Yeah, it is super interesting because what we're seeing is not just US companies, but also foreign companies that want to basically source more of the goods that they're selling domestically. They want to produce it in the United States. And so for at least some sectors of manufacturing, they are seeing increasing demand. But the problem that they're facing is basically hiring and retaining workers. And it seems from some of the factory owners and operators that I been talking to that basically the problem is that younger Americans don't want to work in factories at the same rates that their parents and grandparents did. And so we had a situation for almost every month of last year where there was about 100,000 person shortfall between the number of positions that were being advertised and the number of jobs that were being filled.

[Lauren Weber]

Right.

[Luke Vargas]

We've got to take a very short break, but when we come back, we'll dig deeper into those mismatches which we actually see all over the job market, as well as how those dynamics are fast changing.

[Paul Berger]

Thanks.

[Luke Vargas]

Thanks to technology. Stick around.

[Lauren Weber]

Sergeant.

[Luke Vargas]

And Mr. Smith, you're gonna love this house.

[Lauren Weber]

Bunk beds in a closet.

[Luke Vargas]

There's no field manual for finding the right home, but when you do, USAA homeowners insurance can help protect it the right way. Restrictions. All right, so before the break, Paul was mentioning that fewer Americans are wanting to do certain types of manual labor at a time when we're seeing white collar workers having a harder time landing jobs and remaining unemployed for longer. Lauren, is this a problem with a ready solution, albeit one people may not want to take?

[Lauren Weber]

We do have a lot of underemployed people in this country. You know, whether they're people who have a college degree doing jobs that don't require that, or they're not able to move up the career ladder, not able to move up the job ladder. While many of these blue collar workers jobs go unfilled. It is a huge problem in the sorting of the job market here.

[Paul Berger]

When I was working on the manufacturing story, some of the factory operators I spoke to basically said manufacturing has an image problem. In their opinion it's not as dull and cold and dirty a job as it was 10, 20, 40 years ago. But also they in part blamed the American educational system. And they were saying that they felt that too many kids these days are being pushed into four year degrees that don't necessarily suit them. A growing number of factories are offering apprenticeship programs where kids can go straight from high school into say a four year program. They spend three or four days a week in a factory and one or two days a week in a classroom and they come out at the end of it, they've been paid all the way through, they have zero debt. And the factories I spoke to, they come out with qualifications and a starting salary of something like $50,000 a year.

[Lauren Weber]

Another thing just to add is it's not just a question of like well you have a four year degree and are there enough jobs that require four year degr available. It's also what are the jobs that are available. So for example, many, many people got the message for the last 10 or 15 years that we all need to learn how to code software. So go to a software engineering boot camp and learn how to do that. Well, artificial intelligence can now do some amount of that. A lot of those jobs that people were trained for thinking this is how I'm going to future proof my career, those jobs themselves are changing or maybe some of them are disappearing or the level of expertise you need to be a successful software engineer is now higher because some of the easier work can be automated. So within that white collar big bucket you see a lot of jobs just transforming, sometimes faster than workers can keep up with the skills required.

[Luke Vargas]

And Lauren, good luck trying to change businesses minds about that because if you've reported US productivity is up, driven partly by AI replacing certain jobs and businesses then being able to lay people off as a result.

[Lauren Weber]

That is one of the things I'm going to be watching closely this year. It's hard at the moment to draw a direct line between people being late off because their job has been automated by artificial intelligence. There have been a few isolated instances where companies have been explicit that that's what they've done. We will see more of that. It will take a while because companies you know, are still in, in many cases in the experimental phase with these new technologies. But we'll also see they're not going to replace somebody. They'll let employment numbers fall through attrition, or maybe they'll hire fewer contract positions. So it may not show up in their own employment numbers at the end of, but it will affect vendors or other contractors and subcontractors down through the supply chain of labor.

[Luke Vargas]

And Paul, this is already coming up in the industries that you cover. Just this past week we saw US dock workers and port employers, for instance, reach a tentative deal to end a long running contract fight at the very center of which was automation.

[Paul Berger]

It's a massive issue, particularly for US dock workers all around the country. Every time there is a new labor contract that has to be negotiated with port employers after wages. Automation is the big issue. And here we're not even talking about AI we're talking about autonomous or semi autonomous machinery. And dock workers are very worried that it will replace them. And we've seen in the last couple of years massive disruptions at ports on the west coast, almost like a protest against automation. And we actually saw in October a walkout as part of the eastern Gulf coast labor talks.

[Luke Vargas]

So many people worried about the prospect of their jobs becoming redundant because of technology. Lauren, are there any other trends you're watching that could shake up things in the labor market in the workplace in the year to come?

[Lauren Weber]

Yes, lots of interesting things out there. The question around legal immigration is a huge one because there are many programs that allow people to come into the United States often to fill jobs that are very difficult for employers to fill based on the US Workforce. And those are all going to be looked at and reviewed. And there's a lot of internal division within the Trust administration about where those policies should head. So we're going to watch that closely down to things that have nothing to do with political policy, the push to get people back to the office. Amazon made a big splash in 2024 by recalling all of their office workers back five days a week. The question is, will other employers say, well, that gives us some cover to now do this with our own workforces because we think that'll make us more productive. There's a lot of debate as well about many people feel they're more productive working from home. Bosses seem to feel, generally speaking, people are more productive when they're in the office so they can actually see them working. These are contentious issues that will just continue to come up. You know, we also see companies just getting a little more strict about performance and what they, you know.

[Luke Vargas]

These are the PIPs, right?

[Lauren Weber]

Yes, Performance Improvement Plans. PIPs. Everybody hates them. Managers hate to impose them. Workers hate being under a pip. In many cases, they're just a way to document someone's way out the door and tell them that their time is limited and hopefully they start looking for another job. Companies are using more of these performers performance improvement plans to kind of crack down on what people are doing while they're at work. And companies are under pressure to be more profitable. There's a real push for efficiency, profitability. So, you know, all of these factors are things that will continue to inform that always complicated relationship between workers and employers.

[Luke Vargas]

I've been speaking to Wall Street Journal reporters Lauren Weber and Paul Berger. Paul, Lauren, thank you both so much.

[Paul Berger]

Thank you.

[Lauren Weber]

Thank you.

[Luke Vargas]

And that's it for what's new Sunday for January 12th. Today's show was produced by Charlotte Gartenberg with supervising producer Christina Rocca. And we got help from Anthony Banci and deputy editors Scott Salloway and Chris Sinceley. I'm Luke Vargas and we'll be back Monday morning with a brand new show. Until then, thanks for listening.