The US labor market is showing clearer signs of softening.
And the strain is falling hardest on Americans just entering the job market. Labor Department data released Friday showed the unemployment rate for workers ages 16 to 24 climbed to 10.5% in August, the first time it's topped 10% since the pandemic.
The data comes against a backdrop of an increasingly tough job market for newly minted college grads. The unemployment rate for recent college graduates has consistently outpaced that of the broader workforce in the past several years, reversing a pre-pandemic trend when degree-holders typically fared better, according to a report from the Bank of America Institute published earlier this week.
In June 2025, the unemployment rate for recent graduates was 4.8%, compared with 4% for all workers and 7.4% for young workers without a degree, the report said, citing BLS and Census Bureau data compiled by the New York Fed.
The Institute defines "recent graduates" as workers ages 22 to 27 with at least a bachelor's degree, while "young workers" are those in the same age range without a bachelor's degree.
The divergence between the jobless rate for new grads and the broader population began emerging in the aftermath of the pandemic, with recent graduates starting to see consistently higher jobless rates compared to the broader labor force beginning in 2021. Economists pointed to particular weakness in white-collar occupations, with consulting, tech, finance, and other degree-heavy fields facing layoffs and hiring freezes after the pandemic boom.
"People with college degrees like recent graduates might be finding themselves in an increasingly competitive environment that doesn't necessarily guarantee the same level of employment security that it once did," Taylor Bowley, economist at the Bank of America Institute, told Yahoo Finance.
Bowley pointed to heightened uncertainty around tariffs and investment decisions, as well as new technologies reshaping entry-level roles. That uncertainty has only deepened amid the turbulence of President Trump's unprecedented second term. And while some hesitation is typical ahead of elections, Bowley said this moment feels different.
"It's not atypical to see uncertainty before an election, because businesses wait to see what policies a new administration might bring," she said. "But this is a different kind of uncertainty — one that's been quite persistent since the start of the year and seems to be ongoing."
That backdrop has left Americans entering the workforce feeling especially vulnerable. Glassdoor data shows confidence slipping across the board, with entry-level workers remaining the least optimistic. In August, 45.3% of employees at the start of their careers reported a positive six-month outlook for their employers, compared with 48.3% for mid-level staff and 58.9% for senior employees.
"Sluggish hiring doesn't get quite as much attention as a layoff, but it has a very broad-based impact," Daniel Zhao, Glassdoor chief economist, told Yahoo Finance on Wednesday. "It means folks can't get onto the career ladder in the first place, and it also means that workers who are employed can’t make progress up the career ladder."
Concerns about artificial intelligence replacing entry-level jobs are also playing a role.
That risk was underscored by a recent New York Fed survey, which found that 12% of service firms already using AI reported hiring fewer workers in the past six months, while nearly a quarter of firms planning to adopt AI expect to scale back hiring in the months ahead.
Still, employers aren't looking to cut workers outright, according to Amy Glaser, senior vice president at Adecco, a global staffing firm that connects workers with companies across industries.
"[Companies] spent hundreds of millions automating their facility, and they found automation didn't reduce the number of employees needed. It changed what the work looked like," she told Yahoo Finance on Friday, noting businesses are instead prioritizing adaptability and keeping pace with new technologies.
"You shouldn't be afraid of losing your job to AI," she said. "You should be worried about losing it to somebody who's using it better than you are."
The sectors that were expected to benefit most from recent policy changes are experiencing significant employment challenges, highlighting broader shifts in the American labor landscape.
Manufacturing Sector Struggles Continue
The manufacturing industry continues to face what economists call a prolonged recession in employment. August marked the fourth consecutive month of job losses, with 12,000 positions eliminated. Year-over-year comparisons show the sector down by 78,000 workers compared to the same period last year.
This decline extends beyond manufacturing. Construction has experienced job losses for three consecutive months, while wholesale trade operations—encompassing transportation, warehousing, and material handling—have shed 32,000 positions since May.
Policy Impacts on Employment
Current trade policies appear to be creating mixed pressures on employers. The ongoing trade disputes that began escalating in April have introduced cost pressures that may be affecting hiring decisions across industrial sectors.
Companies are reporting direct impacts from increased costs on imported components. One electric equipment manufacturer noted in a recent Institute for Supply Management survey that tariffs on components have made domestic production more challenging, leading to two rounds of layoffs affecting approximately 15% of their U.S. workforce.
Labor Supply Constraints
Beyond demand-side pressures, supply-side factors are also influencing employment patterns. Immigration policy changes appear to be affecting worker availability in sectors that traditionally rely on foreign-born labor.
Construction provides a notable example: despite reduced hiring, unemployment rates in the sector reached historic lows in August. Ken Simonson, chief economist at the Associated General Contractors of America, suggests this paradox may result from workers voluntarily leaving the industry due to concerns about immigration enforcement.
Economic Analysis
Financial analysts are drawing connections between trade policy uncertainty and employment trends. Morgan Stanley economists identified higher tariffs and trade policy uncertainty as primary factors in manufacturing employment decline, noting that goods-producing sectors have lost 67,000 jobs over four months.
The bank's analysis highlights that foreign-born workers constitute significant portions of employment in affected sectors, making worker availability a compounding factor in the employment slowdown.
Wage Growth Patterns
The employment challenges coincide with moderating wage growth across the economy. Average hourly earnings for non-supervisory workers increased 3.7% year-over-year in August—still above inflation but down from approximately 4% in January.
Manufacturing workers experienced similar trends, with wage growth at 3.9% compared to a peak of 4.6% in March.
Administrative Response
Officials have attributed some of the employment challenges to monetary policy, specifically citing high interest rates as a contributing factor. Economic advisors have also questioned the accuracy of labor statistics, suggesting that reported weak job numbers may be subject to upward revision.
Broader Implications
According to economic analyst Joey Politano, blue-collar industries, including mining, logging, construction, manufacturing, transportation, and utilities, are experiencing their slowest job growth since the pandemic's onset.
This trend carries broader economic significance, as manufacturing and construction typically serve as early indicators of economic slowdowns. The current blue-collar employment challenges may signal potential concerns for the wider labor market if conditions don't improve in the near term.
If you feel like job opportunities are hard to come by right now, it's not just you.
The Bureau of Labor Statistics' latest report on job openings and labor turnover, released on Wednesday, showed that, for the first time since April 2021, there are more job seekers than job openings in the US, Reuters reported.
At 0.99 openings per unemployed person, compared to the 1.05 rate in June, it's the first time job seekers have outnumbered openings since April 2021, when the rate was 0.96.
The bureau's jobs report, released Friday, showed that 22,000 jobs opened up in August, short of the expected 75,000. The unemployment rate slightly increased to 4.3%.
A WalletHub study released Thursday shed light on how unemployment is hitting each of the US states and Washington, DC. Using data from the Labor Department, it ranked all 50 states and DC based on the percentage increase in unemployment claims between the week of August 18 and August 25. It also considered how the number of claims compared to those made a year ago, and calculated the number of claims per 100,000 people in the labor force.
Overall, WalletHub found that the week-over-week increase in unemployment claims in the US averaged 3.5%.
"The dynamic has shifted towards employers when it comes to hiring as employers have slowed their hiring rate significantly, but employers are reluctant to reduce headcount as they recall the challenges of hiring a few years ago," Daraius Irani, the vice president of business and public engagement at Towson University, said in the WalletHub report.
Here are the 10 places where unemployment claims are increasing the most, per WalletHub.