MW The workers most at risk of being laid off now that the U.S. economy has slowed

By Venessa Wong

Trump's tariffs have created conditions that make it hard for employers to 'maintain business as usual,' especially for these workers

The job market held up through the first three months of the year, leading the White House to declare on Friday that the "Golden Age of America is well on its way."

Yet economists told MarketWatch that they expect the Trump administration's sweeping tariff plan, which affects all U.S. imports, to have a wide-ranging, negative impact on jobs moving forward.

"There's no two ways around a price increase like that," Indeed Hiring Lab economist Allison Shrivastava told MarketWatch. "It's going to impact the labor market, and broad parts of it."

As of March 28, before President Trump's worldwide tariff plans were revealed, job postings on Indeed were already down 9.8% year on year. Thousands of federal workers have lost their jobs as part of the White House's efforts to reduce government spending. And Shrivastava said the impacts of tariffs on jobs will likely start to show up in April data and onwards.

The U.S. unemployment rate ticked up to 4.2% in March, according to government data released on Friday. The healthcare, social assistance, and transportation and warehousing industries added jobs. Outside of healthcare, Shrivastava said, "hiring has been really sluggish for a lot of sectors."

To be sure, Friday's jobs report was stronger than expected. But Cory Stahle, an economist at the Indeed Hiring Lab, wrote that "while the headline numbers may be somewhat calming, it has become clear that events are moving faster than the data can keep up with."

Any confidence that "helped buoy the labor market through the first quarter reversed virtually overnight after this week's announcements, and there is likely no going back," he wrote - adding that the speed with which these policy changes are happening are making it challenging for employers "to find the stability needed to maintain business as usual."

While it is still too early to assess the impact of the administration's aggressive tariff and immigration policies on the overall economy, available data show that the U.S. economy has slowed this year. Economists surveyed by CNBC estimate the economy grew by an annual rate of just 0.3% in the first quarter, down from 2.4% in the previous quarter. The Atlanta Federal Reserve estimates the economy shrank by 2.8% year on year in the first quarter.

On Friday, J.P. Morgan raised the chances of a U.S. recession to 60% from 40% following Trump's tariff announcement. Goldman Sachs increased the chances to 35% from 20% earlier this week.

Today's conditions are a "perfect storm" for a recession, said Adam Hersh, senior economist at the Economic Policy Institute, a liberal-leaning think tank. "We're going to have a supply-and-demand shock. The supply shock is going to be coming from these unprecedented, broad-based tariffs, as well as the mass-deportation policy as that progresses. The demand shock is going to be coming both from those two things, as well as the contraction in government spending and the government layoffs that are unfolding."

While all U.S. workers already were facing longer periods of unemployment - the average length of unemployment is now 22.8 weeks - economists told MarketWatch that the softening economy puts particular workers at risk: Those sensitive to business cycles like manufacturing and construction, young workers, and workers in low-wage industries who disproportionately are women and people of color.

Manufacturing, construction and consumer-oriented industries at risk

Trump framed the sweeping new tariffs as a tool for revitalizing American manufacturing. Yet economists told MarketWatch that the manufacturing industry, typically among the first to shed jobs when there is an economic downturn, could be negatively impacted.

Not only will tariffs add costs to imported supplies, but foreign demand for U.S.-made goods may decline if other nations implement retaliatory tariffs.

Meanwhile, construction - which relies on consumer demand and immigrant labor, and also benefits from low interest rates - may also be hit if the economy slows and interest rates remain high. Home-builder confidence fell in March in the face of uncertainty.

"Uncertainty not only affects consumers, but it really affects business investment," said KPMG senior economist Matthew Nestler. "If there is a project to build a factory and it takes five years within this climate, you're likely not going to do that." Likewise, in the housing sector, "if the cost to construct housing goes up because of not only tariffs, but also immigration policies, that hits builder sentiment."

The unemployment rate in the manufacturing industry was 3.1% in March, and 5.4% in construction.

Automaker Stellantis $(STLA)$ said Thursday that it would temporarily lay off 900 U.S. employees and pause production at a plant in Canada and one in Mexico as it assesses the impacts of Trump's tariffs.

Rural economies at risk

About one-fifth of U.S. agricultural products are exported, and 47% of those exports go to Mexico, Canada and China, according to the American Farm Bureau Federation. In response to Trump's tariffs, China and Canada announced retaliatory tariffs on U.S. agricultural goods, which could reduce demand.

Groups representing American farmers say there may be long-lasting impacts from this trade war. "Without meaningful support and a commitment to fair trade policies, we will lose even more family farms, weaken rural economies, and ultimately drive up costs and limit choices for consumers at the grocery store," said National Farmers Union President Rob Larew in a statement.

"Rural communities actually never recovered from the Great Recession," said Gbenga Ajilore, chief economist at the Center on Budget and Policy Priorities and formerly a senior advisor in the U.S. Agriculture Department's Office of the Under Secretary for Rural Development. Much of the government's fiscal response in the wake of the 2008-09 financial crisis went to urban areas and didn't reach rural communities, he told MarketWatch.

Employment outside of metropolitan areas had not yet fully recovered from the Great Recession by the time the 2020 pandemic hit; and by 2022, nonmetro-area employment had not yet recovered to prepandemic levels, according to USDA.

A trade war would cause "more harm to our farmers, and raise costs for everybody," Ajilore said.

Low-wage workers at risk

Generally in recessions, people with low wages are hit hard, and poverty and inequality rise, Marianne Page, an economics professor at the University of California, Davis, has noted previously.

Industries that rely on consumer demand - retail, hospitality, tourism and dining out - are vulnerable to job losses in a downturn. Many of the jobs in these industries are held by women and people of color, KPMG's Nestler noted.

Already, low-income workers have been disproportionately impacted by inflation the last few years as a greater share of their income must be spent on necessities, giving them fewer options to cut back on spending.

Weathering a potential downturn is difficult for people who don't have resources to fall back on, as people who experience a job loss in a recession are more likely to experience long-term unemployment, according to Page.

Younger workers at risk

Young workers are among the most vulnerable in economic downturns, and this can have long-term impacts on their income and wealth, as many millennials experienced. During the Great Recession, for instance, people ages 16 to 24 years old saw their unemployment rate rise to 19.5% in April 2010. The unemployment rate for those ages 25 to 54, meanwhile, peaked at 9% in October 2009, according to BLS data.

Similarly during the pandemic, the unemployment rate for workers ages 16 to 24 was 24.4% by spring 2020, compared to 11.3% for all older workers, according to EPI.

"Young people are the last hired, first fired," said EPI's Hersh. Those graduating from high school or college into a weak labor market may have a lower probability of finding a job or face lower earnings and wages than they would have in a normal labor market.

"This can have a lifetime effect on their earnings and wealth," Hersh added - noting that people graduating into a weak labor market have, on average, 9% lower annual earnings.

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-Venessa Wong

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April 07, 2025 14:37 ET (18:37 GMT)

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