AI and the Labour Market: Hiring Slows, Trades Boom, Entry-Level Door Narrows

The headline number is bad. It is not the whole story.

Average hourly earnings rose 2 cents to $37.62, a 3.2% annual rise. Consumer prices were up 3.5% year over year in June. Pay is not keeping up. The July CPI report, due 12 August, will show whether that gap widened.

Health care was the only industry with notable gains in July, adding 22,000 roles. That is still below its 36,000 monthly average over the past 12 months. Local government education lost 50,000 jobs, retail trade shed 19,000 and financial activities lost 14,000. Construction, leisure and hospitality and the rest were little changed, the Bureau of Labor Statistics said.

Then there is the parallel universe of private payrolls. ADP's National Employment Report, released on 5 August, said private US employers added 44,000 jobs in July, with 36,000 of those in education and health services. ADP found hiring up in financial activities, professional and business services, information, construction and manufacturing, and down in leisure and hospitality, trade, transportation and utilities, and natural resources and mining. Two reports, two directions. The bureau's survey is generally treated as the gold standard, but the divergence is a reminder that monthly payroll numbers are estimates that get revised, and this month's revisions went the wrong way for May and June.

Low-hire, low-fire, again

Economists have a name for what the data describes: a low-hire, low-fire market. Labour Department data released on 4 August showed the quits rate, layoffs and job openings all little changed in June. Fewer people are moving, so fewer vacancies open up for everyone else. LinkedIn data cited by USA TODAY shows applications per job seeker rose in July.

"It's not just that new grads are hitting the market. That happens every year," said Kory Kantenga, LinkedIn's head of economics for the Americas. "We haven't seen as many jobs available for each person looking. That's been declining since peak 2022. It's been relatively steady over the past year, but it hasn't increased either."

ZipRecruiter labour economist Nicole Bachaud put it plainly in a note to USA TODAY: "With job opportunities remaining scarce, more workers are exiting the labour market entirely." That is the mechanism behind the falling participation rate. People are not counted as unemployed because they have stopped looking. The rate dropped partly for a reason that is not good news.

Employed workers are not cheerful either. Glassdoor's Employee Confidence Index fell to a record low in July, and the share of employees reporting a positive six-month business outlook sank to 43.5%. Daniel Zhao, Glassdoor's chief economist, said that even people with jobs worry about landing the next one, a promotion or a raise. "Clearly, employees don't feel like the current job market is working for them," he said.

One counterweight: outplacement firm Challenger, Gray & Christmas reported on 6 August that US-based employers announced 33,429 job cuts in July, down 27% from June and the lowest monthly total in two years. Announced layoff plans are down 41% so far this year compared with the first seven months of 2025. Announced hiring plans hit 16,095 for July, up 47% from June and the highest since 2022. Andy Challenger, the firm's chief revenue officer, said demand is showing up in aerospace, energy and manufacturing, "work that happens on a floor rather than a screen." For the fifth consecutive month, artificial intelligence led all reasons companies gave for job cuts, mostly in technology and transportation.

The trades are hiring

That floor-versus-screen split is where the AI story gets more complicated than the usual displacement narrative. Data centre construction is pulling in welders, pipefitters, electricians and HVAC technicians. Bachaud of ZipRecruiter said postings for welders and pipefitters are up 164% year over year, and that the mean minimum salary for data centre jobs jumped 125.1% year over year to nearly $208,000. She attributed that figure to highly specialised engineering roles pulling the average up. Apprentice-level technicians can take home $40,000 to $60,000, according to Maria Flynn of the nonprofit Jobs for the Future, with experienced electricians above $100,000.

Justin Sinkovich of Columbia College Chicago pointed to Louisiana, where Amazon committed $12 billion to a data centre with 540 on-site jobs, including 1,700 electricians, technicians and security personnel, and Meta's Hyperion project is valued at $27 billion. "These projects create demand for on-site workers and therefore cannot be offshored or conducted remotely, unlike manufacturing and software," he said. Research from Cushman & Wakefield, cited in the same CNBC report, estimates that every 100MW of new data centre development creates nearly 1,300 local jobs, about $110 million in annual wages and $344 million in gross output.

The political weather is turning against the buildout. Gallup found 70% of Americans oppose a data centre in their local area. A New York Times/Siena poll conducted in September found roughly two-thirds opposed regardless of party. A Texas Politics Project poll put opposition to a local project at 57% of voters. According to Data Center Watch, at least 75 projects worth roughly $130 billion have been blocked or delayed this year. Texas Governor Greg Abbott, up for reelection, issued a data centre grid approval moratorium. The construction jobs are also temporary by nature, which limits how much of a structural answer they are.

The front door is closing

The most exposed group may be the youngest. New York Fed data cited by CNBC put unemployment for college graduates aged 22 to 27 at 5.7% as of June 2026, a full percentage point higher than two years earlier for that cohort, against 7.2% for all young workers. The underemployment rate, graduates working in jobs that do not require a bachelor's degree, reached 42% for recent graduates, compared with 33.7% for all college graduates.

The hiring process itself has been automated. LinkedIn research cited by CNBC found 66% of recruiters said at the start of 2026 they planned to increase their use of AI for pre-screening interviews, while 81% of job seekers said they had used or planned to use AI in their search. The National Association of Colleges and Employers found AI skills cited in 16.5% of job descriptions in spring, up from 10.5% last autumn, with 28% of employers seeking early-career talent who can use AI. Handshake says graduating seniors in 2026 mentioned AI skills on resumes at twice the rate of the class of 2022, and that 74% of those mentions were tied to real-world projects rather than coursework.

Students are not uniformly convinced. In NACE's 2026 Student Survey, close to one-third of graduating seniors said AI skills would be of little or no importance to their future careers, and over half said they were not building AI skills and not using AI in their job search. NACE president and CEO Shawn VanDerziel called it a "striking disconnect": employers asking graduates to be ready for AI while a significant portion of students question whether AI belongs in their work at all.

The research on whether AI is actually destroying entry-level work is not settled. The New York Fed has found an overall hiring slowdown in recent years but not one specifically concentrated in entry-level jobs with higher AI exposure. It wrote that "while AI may be contributing to recent labour market developments, it is not the main driver of the slowdown in hiring." Its employer surveys found firms mostly intend to adopt AI through retraining, with limited effects on hiring.

Turkey's game industry offers a preview of a different mechanism, according to reporting by Rest of World summarised by Windows Central. Turkey grew to more than 800 mobile game studios at its peak and served as a pipeline for juniors. One developer interviewed by Rest of World moved from a large studio shipping a game a week to founding his own shop, and found that with Claude Code he needed just two employees for similar output. Entry-level roles are disappearing at smaller studios, and larger studios are reluctant to hire inexperienced developers. A university director in Turkey is now telling students to build their own games while studying rather than expect to climb a ladder from a junior post.

Set that against the top of the industry. In July, Xbox announced its largest ever downsizing, cutting 3,200 jobs across 2026 and 2027, and spun four major studios into independence or new management. Double Fine Productions announced 23 layoffs shortly after going solo. Microsoft has said AI is not being used to replace the most recent batch of laid-off Xbox employees, though its spending on AI infrastructure and data centres has run alongside cuts to underperforming units.

Put the pieces together and the picture is not a single AI shock. It is a low-hire market with fewer quits, wages trailing prices, a construction boom in trades that voters increasingly oppose and that ends when the building does, and an entry-level rung that is being sanded down at both large studios and small ones. The Fed's own researchers say AI is not the main driver of the hiring slowdown. The people applying for their first jobs are dealing with the consequences either way.