U.S. Job Market Stalls Amid Economic Challenges: AI, Policy Shifts, and Wage Growth

U.S. employment growth has slowed significantly as job losses occur in construction, retail, and manufacturing sectors. Despite a declining unemployment rate, hiring remains sluggish due to trade policies and heavy AI investments. While wages rise, economists view the labor market's challenges as structural, signaling minimal error reduction from interest rate adjustments.

The December employment report from the Labor Department revealed a noticeable slowdown in U.S. job growth, with significant losses impacting the construction, retail, and manufacturing sectors. The unexpected decline has been attributed to aggressive trade policies and the cautious approach businesses adopt amid costly AI investments.

Despite the waning growth, the unemployment rate fell to 4.4%, suggesting a relatively stable labor market. Economists warn, however, that the number of new jobs isn't keeping pace with the growth needed for a healthy economy. Meanwhile, wage growth remains robust at 3.8% year-over-year.

Concerns over policy-driven hiring challenges have led analysts to perceive the labor market issues as structural rather than cyclical. As such, predictions suggest limited effectiveness from further interest rate cuts. U.S. financial markets have shown mixed responses, with stocks rising and long-term Treasury yields dropping, reflecting the nuanced outlook for the labor market.

(With inputs from agencies.)