Why the Job Market Is Deteriorating So Much Right Now
The labor market faces a pullback from AI, the Fed and macro headwinds.
A viral chart that has been bouncing around social-media platforms like X over the past few weeks has caught the attention of investing professionals and amateur observers alike.
On the surface, it purports to show a link between the rise of artificial intelligence and the increasingly precarious state of the U.S. labor market.
But TS Lombard economist Dario Perkins said inferring anything of value from the chart would actually be a mistake. Some pundits might be calling it “the most important chart in the world,” Perkins said, but in reality, it is closer to “the stupidest chart in the world.”
“There is a chart that is all over social media as proof of the ‘K-shaped’ economy in the U.S., and the ‘huge impact’ AI is supposedly having on the U.S. labour market. I see it at least 20 times a day,” Perkins said in a report shared with MarketWatch on Thursday.
The chart, shown below, plots the trajectory of the S&P 500 against the number of job openings reported by the Labor Department’s monthly job openings and labor turnover survey. To some, it could look like evidence that the rise of AI — which has propelled the U.S. stock market to dizzying heights — has coincided with a deterioration in the labor market.
But this interpretation is flawed in a few important ways. Most analysts agree that AI technology was first made available to the masses in November 2022, when OpenAI first introduced ChatGPT to the public. But, as Perkins pointed out, the peak in job openings actually occurred months earlier, in March 2022, at more than 12 million jobs. That just so happened to be the month that the Federal Reserve kicked off its campaign of interest-rate hikes to try and tamp down inflation.
Another problem with this perceived relationship: Job openings started to stabilize in April 2024, just as ChatGPT traffic was really beginning to take off, Perkins said.
Rather than AI-related disruptions, it is more likely that the chart simply reflects some of the economic distortions caused by the COVID-19 pandemic. Perkins argued that, rather than jobs being destroyed, job openings were simply being converted into actual jobs as supply-demand dynamics in the labor market came back into balance. This was largely the result of more workers entering the labor force, as the chart below, produced by Perkins, shows.
Similar patterns can be found in labor-market data from around the world, another sign that the pandemic, rather than AI, was likely behind this relationship, Perkins pointed out.
The degree to which AI is already impacting the labor market continues to be debated by economists. Although a paper published by a trio of researchers at Stanford University found evidence that employment for young Americans had softened in fields where the work could be more easily automated by AI.
Everyone recognizes that the job market is losing momentum but it’s hard to find consensus as to why.
The unemployment rate is creeping higher and job growth is stagnant
Companies like Amazon and Meta are initiating layoffs and blaming AI-driven productivity increases
Employees feel less confident about leaving their current roles
Unemployed Americans are taking longer to find new jobs
The reality is that there’s no single reason creating this cocktail of labor market headwinds.
Instead, there seem to be three forces colliding at once.
1. Pandemic hiring wasn’t built to last
The labor market has been what’s pushing the Federal Reserve to cut rates in 2025, but it’s been cracking ever since the COVID hiring surge started to lose steam.
The number of available job openings exploded to over 12 million at the peak of the boom in 2022, and employees had the upper hand against employers.
At the time, it was easy to job-hop. Companies struggled to retain talent.
But much of that hiring turned out to be temporary, a consequence of overstimulated demand and government stimulus checks.
Once spending patterns normalized, employers realized they had hired ahead of sustainable growth, explaining the recent pullback.
2. The Fed turned off the easy-money in March 2022
The same chart lines up with the Fed’s rate-hiking cycle that started in March 2022.
Rising interest rates forced companies to rethink expansion plans and slow down hiring plans.
Tighter monetary policy marked a turning point for the labor market that had been so employee-friendly.
While the central bank at the time adjusted rates to combat inflation, it also sparked the beginning of a steady, two-year decline in job openings.
3. AI and rising productivity
Versions of the chart below have made rounds on social media over the last week, but as the above two charts illustrate, AI is only one component of a three-legged stool.
It’s true that job openings have fallen off sharply since OpenAI released ChatGPT and kicked off the AI revolution, but that happened in concert with rising rates and a structural labor market retrenchment coming out of the pandemic.
That said, AI tools are nonetheless enabling businesses to increase their output with fewer people — opening the door as both an excuse for layoffs as well as legitimate justification.
What’s more, the new technology is reshaping hiring priorities even for companies that haven’t trimmed headcount.
Over time, it’s possible that meaningful productivity gains from AI work to lower the demand for labor even as economic growth accelerates.
It’s a day every IT pro dreads: hearing about layoffs within your company, then being summoned into an HR manager’s office and being dismissed.
The tech industry is going through a purge. Earlier this week, IBM announced plans to layoff a portion of its workforce. Meanwhile, Amazon shared plans to axe 14,000 employees and Meta let go of 600 workers from its AI unit last month. After a layoff comes the uncomfortable question: “What’s next?” For most, it’s dusting yourself off and looking for a new opportunity. According to Overture Partners CRO Mark Aiello, that can be a grueling process.
“Definitely no one ever went to bed on Sunday night saying, ‘Hey, I get to look for a new job. Tomorrow is going to be great!’” Aiello said.
“It could be ‘Reduced cloud spend by 15% through automation,’ or ‘Improved deployment frequency from weekly to daily,’” Huang said. “It’s adding numbers and specifics and showing your impact.”
“Don’t write a novel. No one’s going to read 15 pages,” Huang said. “Let’s try to really keep it short. If you’re more junior, five years [or] under, keep it [to] one page and try to keep it really concise.”
“It’s more secret than anything the CIA does that they don’t explain, and you have to hope that you have the right keywords and the right weighting and all of that,” he said.
“[Overusing Easy Apply] should mean ‘I like to be ghosted’…because that’s basically what’s going to happen to you,” Aiello said. He added that those who do feel inclined to use the function should do additional research and reach out to hiring managers separately.
How to be a notable networker. Networking is also important when professionals are seeking a new opportunity, Aiello added. He said professionals seeking a new role should be specific when discussing their ideal role with their industry connections.
“Don’t just say, ‘I’m looking for a job.’ Help them think exactly of what it is that you do in terms that they can understand,” he said. Emailing or texting similar job postings can help to illustrate what an IT pro is looking for.
Huang suggests tech professionals build strong connections with a handful of local recruiters who specialize in IT.
“If you’re able to have those strong relationships, they will give you access to opportunities that will give you a better chance, rather than just submitting an application and a lot of times turning into a black hole,” she said.
She also advised professionals to announce that they are seeking work on LinkedIn and similar platforms.
“I bet you a lot of people who would see that and have worked with you would be like, ‘Oh, I’m so sad to hear that, but I know of so and so who might be looking. Let me make that connection,’” Huang said. “So, don’t be afraid to broadcast that.”
The golden rules of job hunting. Aiello said it is important for professionals to remember to maintain contact with networked connections, even after they land a new job.
“If the only time you hear from your friend is when you need a ride to the airport or you need help moving after a while, they’re no longer going to be your friend,” he said.
Few workplace issues draw as much attention today as salary transparency. While the European Union is moving toward fully public pay disclosures, the United States has traditionally treated compensation as a private matter. But new data suggests that Gen-Z is pushing back on this norm—just as it challenges many longstanding workplace traditions. Their influence may prompt more companies to reconsider how openly they talk about pay, and there could be real advantages for those that do.
The survey also shows that people are generally curious about what their colleagues earn, with 32 percent saying they want to know more about others’ compensation. Among Gen-Z, that jumps to 38 percent.
There are cultural differences, too. In Europe, 34 percent of respondents say salary discussions are open, compared with just 27 percent in the U.S. and 24 percent in Asia. The report suggests the U.S. remains particularly resistant to pay transparency, with a significant share of workers simply preferring not to talk about compensation at all.
Research has long shown that pay transparency can improve workplace outcomes. In one frequently cited study, workers who were kept in the dark about salaries and bonuses performed worse than those who knew how their pay compared. At the same time, more job postings now include salary ranges, and state-level legislation is increasingly pushing for public pay information.
Interestingly, a 2022 LinkedIn workforce confidence survey found that employees at smaller companies are less likely to feel that salary discussions are discouraged. Smaller teams often foster closer relationships, making transparency feel more natural. In larger organizations, leadership may worry about employees discovering unexplained pay differences—even though U.S. workers have a legal right to discuss their wages under the National Labor Relations Act.
Gen-Z’s expectations are also influencing hiring trends. A recent survey from EduBirdie found that 58 percent of Gen-Z respondents would avoid applying to jobs that don’t disclose salary ranges upfront.
Overall, the evidence suggests that transparency can increase employee trust, fairness, and productivity—especially when pay practices are equitable. With the EU requiring member countries to adopt the Pay Transparency Directive by next June, the move toward openness is likely to accelerate globally.
For business owners, this may be the right moment to embrace more transparency. While acknowledging and correcting disparities may be uncomfortable at first, the long-term payoff could be a more engaged, motivated, and equitable workforce.
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