The United States is experiencing a troubling new economic phenomenon that Goldman Sachs economists call “jobless growth” – a situation where robust GDP expansion coincides with stagnant hiring, creating particular challenges for Gen Z workers and recent college graduates. According to recent analysis by Goldman economists David Mericle and Pierfrancesco Mei, this pattern represents a fundamental shift in labor market dynamics that’s likely to persist throughout the mid-2020s.
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The Anatomy of Jobless Growth
Goldman’s October research note reveals that while America’s economy continues to expand with respectable real GDP growth, monthly payroll growth lags significantly behind historical recovery averages. The economists note that “the modest job growth alongside robust GDP growth seen recently is likely to be normal to some degree in the years ahead.” This disconnect between economic output and employment opportunities represents a significant departure from traditional labour economics principles where job creation typically tracks economic expansion.
Industry experts note that payroll data shows almost all sectors outside healthcare posting weak, zero, or even negative net job creation despite otherwise solid macroeconomic indicators. This pattern resembles what Federal Reserve Chair Jerome Powell described as a “low-hire, low-fire” labor market, where employers remain cautious about expanding their workforce even during periods of economic growth.
AI’s Transformative Impact on Labor Demand
The driving force behind this jobless growth appears to be rapid artificial intelligence adoption across multiple industries. Goldman researchers indicate that most of the nation’s output gains will come from productivity improvements largely powered by AI, “with only a modest contribution from labor supply growth due to population aging and lower immigration.” This technological shift is creating what the economists describe as “a potentially long-lasting headwind to labor demand.”
According to data from artificial intelligence implementation tracking, the share of executives who mention both AI and employment in the same context on earnings calls has reached historic highs. Management teams across numerous sectors are increasingly focused on using AI to streamline operations and reduce labor costs rather than expanding their workforce. Additional coverage of this trend can be seen in recent corporate earnings reports where technology investments feature prominently.
Demographic Headwinds and Entry-Level Challenges
Compounding the AI-driven transformation are significant demographic trends that further constrain job growth. Population aging and reduced immigration levels are limiting labor supply growth, creating a perfect storm for younger workers attempting to enter the workforce. The economists specifically highlighted that “kids coming out of college and younger people, minorities, are having a hard time finding jobs” in the current environment.
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This situation represents a concerning development in jobless recovery patterns, where economic improvement doesn’t translate into proportional employment gains. Key factors contributing to this challenge include:
- Rapid AI adoption reducing entry-level positions
- Macroeconomic uncertainty affecting hiring decisions
- Changing tariff regimes creating business hesitation
- Demographic shifts limiting labor market fluidity
Historical Context and Future Projections
The Goldman analysis places current trends within a broader historical framework, noting that “history also suggests that the full consequences of AI for the labor market might not become apparent until a recession hits.” This ominous observation suggests that the true impact of current technological transformations may only reveal itself during economic downturns.
Recent payroll data confirms the weakening trend, with hiring activity outside of healthcare turning negative on net in recent months. Federal Reserve Governor Chris Waller’s recent comments to CNBC acknowledge these labor market softness concerns, even as official government data remains incomplete due to reporting disruptions.
The persistence of what economists call “job hugging” – where employers retain existing workers but hesitate to add new positions – appears likely to continue. Related analysis of technology partnerships shows how AI infrastructure investments are accelerating this trend across multiple industries.
Broader Economic Implications
The jobless growth phenomenon extends beyond immediate hiring challenges to broader economic considerations. As population ageing continues to reshape workforce demographics, the combination of technological displacement and demographic pressures creates structural challenges that may require policy interventions.
Industry observers note similar patterns emerging globally, with recent international conference discussions focusing on how economies can adapt to these new labor market realities. Meanwhile, global economic initiatives increasingly recognize the need to balance technological advancement with employment stability.
The Goldman assessment concludes that the current era of jobless growth likely represents a new normal rather than a temporary anomaly, suggesting that workers, employers, and policymakers will need to adapt to this transformed economic landscape where productivity gains and employment growth increasingly diverge.
