The slowdown in the US job market isn’t over — and it may get worse.
That’s the warning from Goldman Sachs (GS) economists, who said hiring momentum has weakened more than previously thought. Revisions to earlier data suggest payroll growth is running at levels too low to sustain full employment.
“Our estimate of trend job growth is now clearly below even that low bar at 30k per month,” Goldman Sachs economics analysts David Mericle and Jessica Rindels wrote. “Future revisions to job growth are more likely to be negative,” they said, citing weakness in areas like healthcare payrolls, seasonal hiring, and the way government models account for new businesses.
The sobering outlook came just days after President Trump criticized the bank’s team on Truth Social for being “wrong” about past market calls and too negative about the economy.
The message contrasts with the relatively steady unemployment rate, which has hovered near 4%. But while joblessness doesn’t show major cracks, other measures are flashing yellow, Goldman Sachs said. Labor force participation has slipped, job openings have started falling, and hiring outside a handful of industries has slowed to nearly zero.
That weakness matters for both the Federal Reserve and the White House. For the Fed, slowing payrolls strengthen the case for cutting interest rates to support growth. Goldman Sachs expects three quarter-point cuts this year — in September, October, and December — with potentially two more in 2026 if hiring stays soft.
Read more: How jobs, inflation, and the Fed are all related
For Trump, who has previously touted strong job creation as evidence of his economic record, any further cooling would undercut one of his key talking points.
The Goldman Sachs team also pointed to structural shifts weighing on employment. Immigration has fallen sharply, which means the economy needs fewer new jobs each month to maintain full employment. Tighter immigration policies also suggest immigrant workers are less likely to work or be captured in official data.
But the slowdown appears more severe than immigration issues. Sectors like healthcare and education, which had been adding jobs via “catch-up hiring” to compensate for pandemic-related understaffing, are no longer seeing significant growth. This has contributed to a general weakness in job creation. Other sectors, including technology, manufacturing, and retail, could also face labor force headwinds in the coming months, the Goldman Sachs analysts noted.
Even modest additional softening could have outsized consequences. With the labor market already at the edge of what economists consider maximum employment, a low-turnover environment could make it harder for unemployed workers and new graduates to break in. That dynamic risks “locking out” parts of the labor force, even if unemployment doesn’t surge, the analysts added.
