US Employment Conditions on Labor Day 2025–What to Know

From last year’s Sahm Rule to this year’s tariff impacts, here’s how the labor market is performing this Labor Day.

Hiring ad displayed at a store in Columbia, Md. on July 21, 2025. Madalina Kilroy/The Epoch Times

The national labor market has remained resilient over the past year, serving as a constant in an otherwise uncertain economic climate.

Employers and workers have navigated numerous developments since Labor Day 2024—from the 2024 presidential election to President Donald Trump’s global tariffs.

Here’s the status of employment conditions over the past 12 months.

US Labor Market–Then and Now

Wall Street was in a state of panic heading into the Labor Day long weekend in 2024, as an uptick in the unemployment rate triggered the Sahm Rule.

The Sahm Rule is a recession indicator developed by Claudia Sahm, an economist formerly at the Federal Reserve. When the three-month moving average of the jobless rate rises by 0.5 percentage points from its low over the preceding 12 months, it signals that the United States could be in the early stages of a recession.

In the July 2024 jobs report, the unemployment rate rose to 4.3 percent, the highest since October 2021, effectively activating the Sahm Rule.

Months later, economists viewed it as a false alarm because the economy continued expanding, the labor market still created jobs, and the unemployment rate stabilized at around 4 percent.

Today, while recession fears have dissipated immensely since the April peak of tariff-driven uncertainty, employment conditions could be deteriorating.

The Bureau of Labor Statistics (BLS) reported that the U.S. economy added 73,000 new jobs in July, which was fewer than expected. What’s more, the federal agency revised the May and June numbers lower by a combined 258,000, prompting concerns that the labor market could be heading south.

The adjustments also reduced the three-month moving average to a paltry 35,000. By comparison, for the same period in 2024, the three-month moving average was 170,000.

While job growth may be slowing, other metrics are also in play.

Nominal (non-inflation-adjusted) hourly wage growth was 3.9 percent year-over-year in the July jobs report, unchanged from September 2024. Meanwhile, real (inflation-adjusted) hourly wage growth has been solid this year, rising by 1.2 percent—real weekly earnings have also climbed by 1.4 percent.

The labor force participation rate—the percentage of individuals employed or actively seeking work—declined to 62.2 percent from 62.7 percent.

Average weekly hours have ranged between 34.1 and 34.3.

Other trends that have persisted over the past year are low layoffs, steady resignations, and slower hiring levels. Economic observers have attributed this freeze to employers monitoring the broader economy to determine whether it is heading into a downturn or will emerge unscathed from changes to trade policy.

At the same time, businesses continue to have millions of job vacancies. According to the BLS’s latest Job Openings and Labor Turnover Survey, there were approximately 7.5 million unfilled positions in June, little changed from a year ago.

“Economic activity data show the economy is expanding at a moderate pace, while the jobs data are losing momentum,” Bill Adams, chief economist for Comerica Bank, said in a note emailed to The Epoch Times.

In the second quarter, the GDP growth rate was 3.3 percent, up from the 0.5 percent contraction in the first three months of 2025. Looking ahead to the third quarter, the Atlanta Federal Reserve’s widely watched GDPNow Model estimate points to a 3.5 percent expansion.

Notable Trends

Several trends have emerged in the U.S. labor market this year.

Government Payrolls

As part of the current administration’s efforts to shrink the size of the U.S. government, the direction of federal payrolls is now heading downward.

After exceeding three million last year, the number of federal workers has declined by 71,000 to 2.931 million in recent months, according to the BLS—and the total decline could be a lot greater.

People stand outside in support of USAID employees leaving the building in Washington on Feb. 27, 2025. Madalina Vasiliu/The Epoch Times

According to new data from the Partnership for Public Service, a nonpartisan good government group, almost 200,000 civil servants have left the workforce as of Aug. 26. Part of the reason why these numbers have yet to appear in the hard data is because of the administration’s deferred resignation program. This initiative involves voluntary resignations, placing workers on paid administrative leave, and paying employees full salary and benefits until Sept. 30.

By year’s end, the BLS data may reflect changes implemented by the White House and actions related to the Department of Government Efficiency’s work.

American Workers

Another significant development in the job market this year has been the narrowing employment gap between employed U.S.- and foreign-born workers.

Starting in late 2019, a significant divergence emerged in employment growth between U.S. citizens and foreign nationals. However, in the first several months of the new administration, virtually all jobs have been filled by native-born individuals.

Since January, employment levels for U.S.-born workers have risen by 2.46 million. Conversely, employment levels for foreign-born workers have declined by 1.01 million. Additionally, the civilian labor force for foreign workers has plummeted by nearly 1.5 million since hitting an all-time high in March. The overall civilian labor force level has remained relatively unchanged this year.

Blue Collar Wage Boom

This past spring, the Treasury Department released data showing real blue-collar wages posting their most significant gain in almost 60 years.

Inflation-adjusted hourly wages grew by 1.7 percent in the first five months of 2025 for production and non-supervisory workers.

The last time blue-collar wages outpaced inflation at this rate was during Trump’s first term. In addition, the only other president to post positive blue-collar wage growth data was President Richard Nixon, who recorded 0.8 percent growth in 1969.

Looking Ahead

Recent indicators suggest that small-business owners have become more optimistic than they were in the spring.

The July Small Business Optimism Index rebounded above the 52-year average, with entrepreneurs reporting better business conditions and expectations that it is a good time to expand operations. Labor quality remained a challenge.

“While uncertainty is still high, the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20 percent Small Business Deduction permanent and the final shape of trade policy,” Bill Dunkelberg, chief economist for the National Federation of Independent Business, said in a statement.

A new Main Street Economy Survey by RedBalloon and PublicSquare reveals that four in 10 small business owners plan to hire or backfill open positions, up from 18 percent in the summer of 2024.

Findings from the bimonthly survey also show that 55 percent of respondents stated that hiring has not become any easier.

“At RedBalloon, we’re definitely seeing momentum in the talent market,” Andrew Crapuchettes, CEO of RedBalloon, said in a statement, adding that he sees the economy “emerging from a time of labor market turmoil into a sustained march forward.”

In the coming year, unemployment is expected to rise and employment gains are projected to slow, according to the Philadelphia Federal Reserve’s Third Quarter Survey of Professional Forecasters.

By the fourth quarter of 2025, the unemployment rate is forecast to edge up to 4.4 percent from the current 4.2 percent. Payroll growth is predicted to average 70,700.

Ultimately, according to Jeffrey Roach, chief economist for LPL Financial, the labor market’s strength or weakness will influence growth prospects.

“We still expect Q3 GDP to be close to zero, but the outlook for 2026 GDP growth could improve if the labor market holds and credit availability improves,” Roach said in a note emailed to The Epoch Times.