Hailey Whitlock, Editor

As of late, it may have appeared that the job market is simply untenable, with arduous challenges at every step. If you noted this perceived difficulty, you are not alone and you are not wrong. 

“Hiring, while certainly not on a freeze, is on hold; and people that have jobs are absolutely holding onto them with white knuckles. I see that as definitely a labor market that’s stagnating,” said Dan North, Allianz Trade’s Senior Economist for North America, to CNN. 

The job market truly is struggling right now; however, the growth of the economy is not. Typically when the job market stagnates so does the economy–the two function in tandem. However, the current economic climate is not following this structured path. Federal Reserve governor Christopher Waller stated in late February as reported by the Wall Street Journal, “This would be the first time in my career, my life that I saw an economy growing like this and zero job growth. I don’t even know quite how to think about this because I’ve never seen it before.” 

Job growth is stagnating yet the economy is growing. You may ask how this is possible. There are many engines of growth, with key examples being growth of the labor force and productivity. When more people are hired, the economy grows; when the current workers are more productive, the economy also receives a boost. Usually the two go together, however, right now labor is stilted and almost all of this growth is a result of increased productivity. As per Wall Street Journal, Erik Brynjolfsson, the Director of the Stanford Digital Economy Lab declared, “With labor force growth slowing to a crawl, productivity is no longer just one of the engines of growth – it’s close to the only engine left.” 

One key factor in this paradox is the growth of AI. Many professionals claim that AI will not take jobs, but instead function to increase productivity for workers. While this may appear true for these workers, and often is given their circumstances, a lot of the roles AI is filling are those typically done by entry level employees. That means people more often than not, people may not be losing jobs in droves due to AI (although that happens too), but instead the companies are hiring less entry-level workers, such as college students as those roles are being done by AI.  This prompts greater productivity with existing workers, seeming to mitigate the need to hire. 

This poses a significant problem for college students who are struggling in an incredibly competitive job market for the remaining entry level roles. 

This results in a K-shaped economy where workers are split into different classes, experiencing radically different job markets. For those on the higher end of the K, those with high income or in areas with more in demand and valuable jobs, there are rising wages and stable income. Those on the lower portion of the K, who have lower income or are in more vulnerable areas, face an incredibly difficult job market with reduced hours and less hiring. Tyler Schipper, an associate professor of economics at St. Thomas University summarized this concept to CNN: “The question I ask myself is ‘What would be the conditions in which I think the labor market would ramp back up?’ and some of those are policy related. I have a hard time seeing those resolving themselves anytime soon. For better or worse, I think we could be in this K-shaped economy for some time. And I think the way out of it probably is that there’s a recession before things get better, which is never what you want to hear if you’re on the lower leg of the K.” 

With concerns pertaining to a potential recession, the job market is fraught. The key reason the job market is not expected to be fixed any time soon is that the economy is doing well; this removes some of the pressure to fix the job market as soon as possible. However, the job market has real impacts on workers and must be addressed. The Federal Reserve has begun making judgments, factoring in these concerns.