Photo credit: Yannic Kreß

Following roughly two decades of ultra-conservative fiscal policy, Chancellor Friedrich Merz decided in early 2025 that the threats of this decade were serious enough to warrant a complete U-turn: a massive fiscal stimulus was announced — the “Sondervermögen,” loosely translated as “special fund.” Some €500 billion was set aside for investments in infrastructure and renewable energy, and defense spending was exempted from the constitutional debt brake. While the sums involved were of unprecedented scale, Germany’s economy continued to stagnate throughout 2025. The key constraint: the funds were deployed at a slower pace than expected due to bureaucratic hurdles. However, economic figures for this year are signaling that the German economy is finally accelerating. This also has implications for the labor market. The demand for workers in certain industries — defense, aerospace, construction, and energy — is rising rapidly, putting further pressure on employers filling specialist roles.

Revised data shows German growth accelerating

Germany’s economy was supposedly stagnant throughout 2025, and this year’s oil shock and shipping disruptions due to low water levels on the Rhine added to the concern that an economic revival would remain elusive. However, data revisions released in August show that the economy has performed slightly better since 2024 than earlier estimates indicated. The revised figures imply that first-quarter GDP this year was about 0.7% higher than previously thought.

Looking at GDP contributions, one can see how fiscal policy is doing the heavy lifting. Since the second quarter of 2025, Germany’s economy has grown at an average quarterly rate of just 0.2% (about 0.8% annualized growth) — and of that, government consumption has contributed about 0.18 percentage points per quarter. In other words, the vast majority of Germany’s already modest growth over the last five quarters has come from fiscal spending, with net exports supplying most of the rest. The bright spot is the trajectory: on an annualized basis, economic growth has accelerated from roughly 0.5% in the second half of 2025 to about 1.5% in the first half of 2026.

As a result, updated growth projections now expect that the economy will expand by about 1.1% in 2026, followed by 1.5% in 2027. A study by the Bundesbank, Germany’s central bank, estimates that about 0.44 percentage points this year, and slightly more next year, will come from government spending on defense and infrastructure — roughly 40% of the total. That may well understate the fiscal contribution, since higher government spending can also boost private sector confidence and therefore stimulate additional business investment and consumer spending.

The fiscal boost is showing up in defense and infrastructure

Within half a decade, Germany’s military spending roughly doubled from less than €50 billion in 2019 to about €100 billion last year, with projections showing a further increase to about €144 billion by 2027. The rearmament has catapulted Germany to become the biggest military spender in Western Europe, and the fourth largest in the world.

Of course, higher military spending does not always translate into increased economic activity. Buying American fighter jets would do nothing for German production. But Germany’s defense industry on its own is large enough to fulfill a significant share of the arms orders the German armed forces require in the years to come.

On top of higher defense commitments, there is a noticeable increase in infrastructure spending that is being funneled into the German economy. After more than 15 years of underinvestment, funding for rail infrastructure surged from about €10 billion in 2023 to just under €20 billion in 2025. Total federal investment is projected to double between 2024 and 2026 from less than €60 billion to about €126 billion, with the special funds for infrastructure and climate accounting for more than half of that total.

Note: Figures include financial transactions (e.g. rail equity and loans) that count as investment under budget law but aren't real fixed investment — most notably inflating 2025.

Manufacturing orders are bouncing back

Another positive trend: Germany’s exports are finally gaining momentum again. For the first time since early 2024, trade is set to make a positive contribution to annual GDP growth. The industrial sector, specifically, is benefiting from a more supportive global business environment as the AI investment boom lifts growth around the world. Manufacturing orders are increasing as the demand for German products picks up, especially in fast-growing Eastern European economies. As a result, Germany’s manufacturing PMI (Purchasing Managers’ Index) has risen to its highest level in more than four years.

The rise of the far-right should be a genuine concern

Just as fiscal spending finally revives growth, political instability is deepening. The Alternative für Deutschland (AfD) just won the state election in Saxony-Anhalt and will likely govern there, which would mark the first time since World War II that a far-right party has held power. Even though the state just has 2.1 million people, the political fallout is substantial and could threaten the current economic recovery. Germany’s boom is running straight into a wall of worker shortages, which can only be filled with skilled immigration. The AfD’s defining policy is not just to slam that door shut, but to push migrants back out. The party is also opposed to the very debt-financed stimulus now supporting growth. A stronger far right raises questions about whether Merz’s reform packages and fiscal continuity will survive. Add the AfD’s sympathies for Putin, its Euroskepticism, and the reputational risk of doing business in a state it governs, and you get exactly the kind of uncertainty that makes firms hesitant to hire and invest. In other words, the political headwind might start canceling out the fiscal boost right when Germany can least afford it.

What does this mean for recruiters?

Broadly speaking, the German labor market remains sluggish after more than five years of stagnation. However, there are signs of economic revival as growth is picking up. More importantly, LinkedIn’s hiring indicator has recently risen above its long-term trend, a first since early 2024.

The surge in public investment is already heating up specific pockets of the labor market. The money is flowing overwhelmingly into skilled trades tied to construction, energy, and defense, which are precisely the occupations where shortages are most acute. Expect intensifying competition, upward wage pressure, and longer time-to-fill in exactly those segments, even as the wider labor market recovers more slowly.

The winners will be recruiters who move early and build talent pipelines in skilled trades before the demand wave fully lands. That means leaning harder into apprenticeships and reskilling, retention over replacement, and international sourcing because domestic supply can’t cover the gap. However, the AfD is the political wildcard that cuts right through this strategy: labor shortages will become even more entrenched if immigration tightens under a stronger far right.

Photo credit: Alex Kotliarskyi

The U.S. labor market is showing some unexpected strength at the end of the summer, adding some 162,000 jobs in August. That number is nearly three times what economists expected (55,000). Moreover, positive data revisions added another 55,000 jobs to the two prior months, while the unemployment rate remained low. Simply put, this is a good jobs report, and it changes the employment picture: from a sluggish labor market this summer to one that has suddenly outperformed expectations by quite a bit. The six-month moving average of job growth is at 106,000, which is the highest in over two years. It also shows the importance of not putting too much weight on any single data point since later data revisions often reveal new information.

Industry Breakdown

Leisure and hospitality was one of the big drivers of this month’s surprisingly good report, adding more than 62,000 jobs after underperforming earlier this summer despite the World Cup taking place. Healthcare and social assistance added 28,000 jobs, followed by 22,000 in construction and 16,000 in manufacturing.

One sector that continues to underperform is information and communication, which lost another 23,000 jobs. It remains unclear to what extent AI is driving this adverse trend. Professional business services, the other sector considered to have high AI exposure, added some 10,000 jobs in August.

Construction delivered an upside surprise. Even as interest rates have been heading higher — typically a headwind for the sector — employment growth has been picking up in recent months, with 22,000 jobs added in August. It is pretty clear what’s driving this: the sector is riding the data center boom, which is now large enough to show up in the GDP figures. Data center construction is also creating very tight regional labor markets in the parts of the country where this infrastructure investment is taking place.

Another surprise: healthcare, normally the engine of job growth, lost some momentum, adding just 13,000 jobs. Employment in nursing and residential care facilities even declined.

Local government education rebounded with 42,000 jobs, reversing the sharp decline in July and confirming suspicions that recent volatility is a seasonal distortion — the regular rise and fall of public-school payrolls during the summer.

Unemployment steady while wages run below inflation

The unemployment rate remained low at 4.1%, unchanged from the previous two months. As a result, worries about the labor market that emerged last fall have clearly subsided.

The prime-age labor force participation rate ticked up to 83.4%, but remains noticeably lower than earlier this spring. This is the only figure in the jobs report that gives any real cause for concern. There is, however, the possibility that the dip is just a weird data error, driven by seasonal adjustment factors or other statistical quirks. Or perhaps the Trump administration's tighter immigration policies are shrinking the pool of foreign-born workers, who tend to have higher participation rates.

Wage growth showed little change, with average hourly earnings for frontline workers (non-managers) growing at a rate of 3.3%. Given the recent acceleration in inflation due to the oil price shock, real wage growth is now negative. This is obviously bad news for workers. But given the strong job numbers, this will not really change the outlook for the Federal Reserve: Monetary policymakers will now, in all likelihood, raise interest rates in September, as inflation measures show rising price pressures and the labor market data has substantially surprised on the upside.

What the preliminary benchmark report is telling us about the labor market

The monthly payroll numbers we discuss on each jobs day come from a survey of roughly 121,000 businesses. Over time, the survey might drift away from the true state of the labor market. That is why, once a year, the Bureau of Labor Statistics (BLS) checks its homework against unemployment insurance tax records covering nearly every employer in the country.

This year’s preliminary benchmark report, released on August 28, was refreshingly boring. Total employment in the year through March 2026 was revised down by 79,000, or 0.1% — far smaller than the revisions in previous years: 860,000 in 2025 and 600,000 in 2024.

The story gets more interesting at the sectoral level. The pattern of revision tells a slightly different story from the monthly employment data: Information was revised up by 87,000 jobs, or 3% — the largest percentage gain of any sector. Construction was revised up by 62,000, financial activities by 85,000, and transportation and warehousing by a striking 135,100. The offsets were concentrated in goods handling and consumer-facing work: retail trade was revised down by 154,600, wholesale trade by 86,200, and manufacturing by 67,000. Keep in mind, though, that these revisions will not be incorporated into the monthly jobs data until February next year.

What does this mean for recruiters?

The August job numbers surprised on the upside, with various sectors outperforming expectations: hospitality, construction, and manufacturing, to name just a few. The combination of above-target inflation and surprisingly resilient employment growth means the Federal Reserve will very likely raise rates this fall.

While the tech sector continues to shed jobs, keep in mind that this data is subject to revisions, which could reshape the story later — sometimes substantially. The preliminary benchmark estimates released last week suggest that some sectors were performing better than the monthly reports indicated in the year through March 2026. In other words, the parts of the economy we’ve been telling you were struggling — white-collar tech hiring, construction under high interest rates — have been creating more jobs than the initial data suggested, while the weakness in retail was deeper than we thought.

For recruiters, this doesn’t exactly reshuffle the entire hiring landscape, but it does change the picture. If construction employment has been understated, the talent pool in that field is even tighter than the monthly jobs data suggested. The upward revision to transportation and warehousing is the one to watch heading into peak season: competition for warehouse labor is likely to be stiffer this fall. Retail is the mirror image, with a larger pool of available candidates than the headline numbers imply.

Here are all the pieces that we published in August. Keep reading for data releases coming up this month and other interesting labor market news, brought to your inbox by the Recruitonomics team.

Upcoming Economic Data Releases and Events

• · September 4: US Employment Situation Report

• · September 7: Eurozone GDP (regular estimate, Q2 2026) and employment data

• · September 11: US CPI

• · September 11: UK GDP (monthly estimate, July 2026)

• · September 15: UK Labour Market Overview

• · September 15: Eurozone vacancy statistics (Q2 2026)

• · September 16: UK CPI

• · September 17: Eurozone CPI (final August reading)

In recent news:

Julius Probst, PhD

AI is reshaping labor markets in unexpected ways

While the most obvious aspect of the AI boom is software — chatbots, copilots, and agents — its largest economic footprint right now is physical. The technology built to automate knowledge work is, first and foremost, one of the biggest capital-investment programs in modern history. The numbers are hard to overstate. Just four companies (Amazon, Alphabet, Microsoft, and Meta) are on track to spend north of $700 billion on capital expenditure globally this year, roughly seven times their combined outlay five years ago.

A large share of this money flows into the US economy. At 1.6% of GDP, AI-related capital spending has now surpassed the peak of the late-1990s telecom boom. The spending spree in the U.S. is also starting to show up in the labor market data, and the occupations benefiting the most aren’t the ones the AI narrative would predict. There is a significant surge in demand for construction workers, electricians, HVAC technicians, and pipefitters who build and power the facilities. Lightcast postings data across eleven construction and skilled-trade occupations shows a hiring wave that began in early 2025 and is still accelerating: Unique postings in those occupations climbed from roughly 40,700 in January 2025 to an all-time high of 57,670 in June 2026, a 42% jump.

The imbalance in AI infrastructure spending is dwarfed by an even starker one in the private capital that funds AI companies in the first place. Venture money, unrelated to the infrastructure build-out mentioned above, is pouring into AI startups at an unprecedented rate. And again, America is leading. In 2025, the U.S. attracted $194 billion in AI venture capital, more than twelve times the EU’s $15.8 billion. The U.K., despite an economy roughly a sixth the size of the EU’s, matched the EU’s entire AI venture capital inflow almost dollar for dollar ($13.8 billion versus $15.8 billion). This is a striking illustration of how the Anglosphere is dominating the current technological supercycle. The AI business ecosystem is mainly being built in the U.S. — and, to a lesser extent, the U.K. — where startups and technology companies benefit from the deep financial networks of large American cities and London.

The obvious follow-up question is whether our economies will benefit from this surge in AI investment in the long run, or whether it’s just a lot of money poured down the drain. While it is a little too early to be certain, there are some tentative signs that AI is starting to increase worker productivity. The U.K. — long known for suffering from two decades of subpar economic growth — is experiencing a small productivity revival, according to some preliminary data. And it’s showing up in exactly the parts of the economy where we would expect artificial intelligence to have an impact: the tech sector and professional business services. Since 2019, output per hour worked has increased by 40% in tech and by 16.5% in professional business services (5.15% and 2.3% annualized growth, respectively). This has been sufficient to boost growth in the U.K. even as the economy faces several other headwinds (the oil price shock and elevated global uncertainty, among others). If these rates can be sustained thanks to faster AI adoption, living standards could finally start improving again. That would be welcome news, and further evidence that the AI investment boom is translating into real economic gains.

Photo credit: Joe Cleary

The U.K.’s new Prime Minister Andy Burnham, former mayor of Manchester, believes that the city can serve as a role model for the U.K. economy. And he is probably right. Greater Manchester has been one of the rare economic bright spots in the U.K., with the metropolitan area being the one place rivaling London in terms of growth and job creation.

But what exactly is Manchester’s success built on? It is crucial to draw the right lessons from the city’s growth and not be misled by false narratives that are not borne out by reality. Specifically, the nostalgia for manufacturing jobs as a source of strength rests on a faulty belief about the sector’s importance. Instead, Manchester has thrived thanks to professional business services, which are today’s main driver of economic growth.

Manufacturing is not making a comeback

Even today, a widely shared belief persists that manufacturing jobs could return if only sufficient public support were provided. Alas, nothing could be further from the truth! While politicians can score cheap points by protecting certain well-paid manufacturing jobs, the industries in question are simply not that important anymore. Manufacturing’s employment share in the economy has fallen from 30% in the 1970s to less than 8% today. Outsourcing to where production is cheaper — Southeast Asia — has certainly played a role, but the bigger contributor has been technological change. The sector has enjoyed high productivity growth for decades, with automation on assembly lines being the biggest culprit of labor displacement.

Instead, service industries have taken over as the engine of job creation across advanced economies. Technology, professional business services, finance, and real estate have been the key wealth creators for decades, providing workers with well-paid jobs, for the most part.

That is not to say that some regions haven’t suffered disproportionately from the decline of industrial production. Workers in the Midlands, with Birmingham once at the heart of the Industrial Revolution, have seen their employment prospects deteriorate as manufacturing jobs disappeared. But the clock cannot be turned back. It’s better to focus on the sectors creating wealth today rather than to dwell on the past.

Manchester’s success story

Data from the Office for National Statistics (ONS) shows a clear pattern of regional disparities within the U.K. Economic activity in London has grown significantly faster than in most other large metropolitan areas over the last two decades — and it isn’t even close. There is but one exception: Manchester’s economy has grown even faster.

When we look at payroll job growth since 2015, roughly when the data started, Manchester comes out as the clear winner again. Local payroll employment has grown by a stunning 30% over the last decade, more than 2.5 times the national average. London’s growth, constrained by the local housing market, has only been 15%, with many other British cities performing similarly or worse.

What sectors have created jobs?

Which sectors have contributed to Greater Manchester’s success story? The ONS regional employment statistics tell a similar story. Manufacturing jobs continue to dwindle, with employment down by about 10% since 2015. The two industries driving job growth are the tech sector (up by about 25%) and professional business services (up by 55%). Those two sectors now employ about 60,000 and 160,000 workers, respectively, compared with 96,000 in manufacturing. Finance accounts for another 45,000 jobs, but its growth has been more muted.

Like it or not, professional business services are the real engine of wealth creation in today’s economy. With its English-speaking, highly skilled workforce, the U.K. has a comparative advantage in service exports — consulting work, tech, and financial services provided to customers abroad. In fact, the U.K.’s services share of exports, at about 59%, is roughly twice as high as that of most other advanced economies. It is no exaggeration to say that the U.K. is a service export superpower, with those sectors driving economic growth.

Manchester is well placed to benefit from the boom. It has good universities and a large skilled workforce, more competitive wages than London, and an office and housing boom that accommodates rather than constrains the local economy. Big employers are taking notice. The global bank BNY plans to expand its office in the city where it already employs 2,000 people. And it is not just finance and tech. International law firms are also increasing their footprint. Lightcast data shows how Manchester’s employment for four different white-collar occupations — lawyers, financial analysts, software developers, and recruiters — is far higher than the national average. The gap has widened over time and is projected to grow further by 2030.

The creation of the Manchester Digital Campus, a government hub with a focus on digital work, together with Burnham’s decision to create a regional office for the Prime Minister (“No. 10 North”), should help solidify the city’s appeal as an attractive alternative to London.

What about housing?

Manchester’s economic growth has been made possible by faster housing construction. Data from the ONS shows that housing completions in what I will call “Inner Manchester” — the boroughs of Manchester, Salford, and Trafford — rose almost fourfold between 2015 and 2021, from around 1,500 homes a year to 5,600, before falling back sharply. Housing completions in the 12 inner boroughs of London, on the other hand, have steadily declined over the last decade.

The difference is even starker when adjusting for population levels. Housing completions per 1,000 residents in Inner Manchester peaked at 5.3 in 2021/22, while in Inner London they have hovered between 2 and 3. But the chart below also illustrates something else. Manchester’s growth story is very much contained in the city center. Housing completions in Greater Manchester (10 boroughs) have not exceeded those of Greater London (33 boroughs). Burnham can rightly speak about his city’s success in building housing. However, construction in the greater metropolitan area has been just as weak as in the rest of England. And last decade’s boom in the city center has now also come to a stop. The combination of high interest rates, surging construction costs, and regulatory overdrive has hammered housing development.

What does this mean for recruiters?

Contrary to the popular narrative, Manchester’s economic success proves two things. First, building plenty of houses is key for a city to prosper. And no, England is not running out of room anytime soon. Second, the city’s growth has been fueled by professional business services — tech, consulting, law, and finance jobs — rather than blue-collar work. Many companies are eyeing the North as a viable alternative to costly London. Greater Manchester has a deep labor market with plenty of skilled workers. For recruiters, this means that talent attraction could become both easier and cheaper: being in London is no longer necessary for companies to thrive in the U.K. Burnham seems to agree.

Photo credit: GR Stocks

There should be little doubt by now that AI will change our economies and labor markets in a fundamental way. The investment boom is already having a macroeconomic impact, with major U.S. tech companies plowing more than $1 trillion dollars into data centers. Labor markets are feeling the transformation as well, with the demand for workers shifting rapidly, and sometimes in unexpected ways. While the world economy will see stronger growth as AI is increasingly deployed, not everybody will benefit. Just like in previous technological cycles, the gains are spread unevenly. So you might wonder: who are the biggest winners and losers from AI? Don’t worry, keep reading — we’ll tell you!

1. Winners: Advanced economies

Economic theory suggests that poorer countries have the potential to grow faster and catch up with rich countries, provided they develop similar high-quality institutions and can rely on a skilled workforce. Eastern Europe is probably the best example of a previously underdeveloped region growing rapidly to join the club of high-income countries.

However, AI might throw a wrench into global convergence since the technology favors advanced economies. New research by the IMF shows that AI usage is highest in English-speaking high-income countries like the U.S. and the U.K., where adoption has spread much faster across sectors and occupations. The authors estimate that the total labor cost saved by AI usage (the “labor cost equivalent”) is approaching 3% of GDP in some high-income countries. This provides an indicative measure of the productivity gains that are feasible. The growth potential unleashed by AI is significant as workers become more productive across many different industries and professions, and not just a select few. The implication is that rich countries could start outgrowing poor ones in the years to come as AI adoption speeds up.

Source: Aggregate Gains from AI and Their Distribution: Global Evidence from Usage Data

2. Losers: Emerging markets

In emerging markets, AI adoption is narrow and tilted toward the very high-paid occupations, leaving most sectors and occupational spaces completely untouched. While top lawyers, software developers, and scientists might use AI frequently, the technology has not spread to the broader workforce. The low adoption is obviously concerning because it severely limits productivity gains. There is a considerable risk that poorer countries will underperform economically in the coming decade because they are bypassed by today’s technological supercycle.

3. Winners: Skilled AI workers

They are the obvious winners of today. As AI’s knowledge and output improve, so too does the productivity of workers who know how to harness it. These highly skilled workers are seeing their wages rise alongside this newfound productivity, with top earners reaching the upper six-figure range in the U.S. Anthropic is a great example of this. It offers software engineers an incredible base pay of $300,000. Compensation climbs with seniority, reaching $625,000 for senior staff software engineers — and that doesn’t even include the equity shares Anthropic offers on top. The productivity boost from AI will without a doubt widen the divide between these skilled knowledge workers and our next biggest loser, routine white-collar workers.

4. Losers: Routine white-collar professions

The fear that “AI will take over all jobs” is largely overstated; however, AI is contributing to slower hiring for routine white-collar desk jobs. We are already seeing this happen in large consulting firms, financial companies, and tech. Many big companies have significantly reduced job postings and are projecting lower headcount in the years ahead as they seek to improve efficiency through automation with AI. The roles that are made redundant include HR professionals, project managers, marketing roles, customer service, and administrative assistance. Especially for the latter two occupations, AI has shown great promise in automating many of the tasks.

5. Winners: Data center construction jobs

Blue-collar workers, on the other hand, stand to gain from the boom. Data center construction is increasing exponentially across the U.S., and with it the need for jobs required to build out the infrastructure. Electricians, plumbers, pipefitters, and HVAC technicians are benefiting from surging orders and the rising pay that follows. Job postings for these roles are climbing. This is especially the case in remote areas where the AI infrastructure is being built, while skilled workers are in short supply.

6. Losers: Companies competing with the AI boom

With the rapid expansion of data center construction, demand is rising for the skilled trades needed to build and maintain these facilities. This surge in demand is putting additional pressure on employers already competing for a limited pool of qualified workers, intensifying the hiring squeeze and pushing wages higher. Walmart is a good example of this. Maintaining its stores and logistics centers relies on the same workers needed for the data center buildout: HVAC technicians and commercial electricians. And what’s true for Walmart also applies to many other businesses with less financial firepower that are caught in a talent war with the companies involved in the AI boom.

7. Winners: Experienced professionals

Anthropic’s career page reveals a substantial jump in compensation as workers reach senior-level positions. Looking at job postings, we can see that this divide extends beyond salary. Job ads for senior-level roles have almost doubled since 2023. Meanwhile, demand for junior-level hiring has fallen well below its post-pandemic peak, although recent data suggests a modest recovery. As technology becomes more deeply integrated into large companies, employers are increasingly favoring the skills and experience of senior workers, which seem complementary to AI.

8. Losers: Graduates

Graduates are facing one of the worst job markets in many years. The rising adoption of AI, combined with the persistence of remote and hybrid work since the pandemic, makes it increasingly difficult for young workers to enter highly AI-exposed occupations. Working from home increases the cost of hiring inexperienced employees because training, supervision, and mentorship are harder to achieve in a remote setting. Meanwhile, many employers are using AI to automate tasks that young workers have previously done. As these two factors work together, it is impossible to ignore the conclusion that recent graduates and entry-level workers are getting the short end of the stick.

9. Winners: Soft skills — the human premium

As AI is implemented into day-to-day work at large companies, those with strong soft skills, such as leadership, communication, and public speaking, will begin to stand out. It is no secret that AI can create nearly seamless presentations and analyze incredible amounts of data quickly. However, it still cannot communicate ideas to a team or crowd as effectively as a human can. A monotone video created by AI will never be as compelling as a truly witty and charismatic speaker addressing clients in person. Along the same lines, quality leadership of a team or corporation will not be replaced by an AI agent anytime soon. As AI improves, the human element becomes more important again. Students are already adapting to the change. Enrollment in computing degrees has fallen significantly, while social science degrees are becoming more popular.

10. Losers: Hard technical skills like coding or math

Claude and other large language models (LLMs) can code much faster and cleaner than humans can. Degrees like computer science and math become less valuable as LLMs prove theorems that have eluded mathematicians for decades. It is still helpful to possess the knowledge and skills that these degrees come with, but their value is declining in relative terms.

What does this mean for recruiters?

Like any General Purpose Technology, AI creates both winners and losers. When the steam engine was created, factory owners were among the biggest beneficiaries, while artisans faced increasing competition and displacement. When electricity became widespread, most businesses and households benefited enormously, but lamplighters were displaced. Innovation comes with a cost but can also be incredibly rewarding. Although the disruption caused by the AI boom may be divisive, technological change at such scale has historically boosted growth and lifted living standards. The challenge for workers is to adapt quickly enough to benefit from it. For recruiters, the trends highlighted above suggest that the fiercest competition will be for the trades, senior talent, and people-facing skills — while demand for routine white-collar roles and junior positions keeps softening.

In light of the most recent controversy, an op-ed in the Financial Times that was supposedly majority-written by AI, we believe it is important to inform our readers about our internal AI policy. Here is how the Recruitonomics team uses artificial intelligence for research and for writing:

1. Our pieces are written by humans (well, economists)

Recruitonomics is not producing AI slop! All of our pieces are human-written; we do not allow AI to write a large share of our content. You can double-check this yourself using Substack’s recently implemented AI detector called Pangram, which works for all articles published after July 20, 2026. Example:

You might now object that Pangram’s verdict is a probabilistic estimate and therefore not bulletproof. But if we ever produce a piece where AI has played a substantial role in the writing process, our policy is to tell you upfront.

2. We use AI for editing

We use AI to edit our pieces. This includes typos, grammar, and language checks. We hope you appreciate that!

We also use AI for minor writing edits — this could involve shortening some sections that include repetition or some rephrasing of our own writing output, while keeping our tone of voice. The way we’ve used AI in editing so far is to ask it to identify places where our original phrasing wasn’t as crisp or clear as it could have been, and to suggest minor edits.

Sometimes we accept the AI edits, sometimes we don’t, sometimes we reprompt (and re-reprompt), and sometimes we use a mix of AI suggestions together with our own input to make further improvements. You get the idea. Generally speaking, we are quite conservative in our approach, which is precisely why every article of ours published since July 21 has been flagged as 100% human-written by Pangram.

3. We use AI for research

AI is extremely useful for research. Here are examples of how we might use it:

1. Providing a literature review; summarizing the state of the art on a given research topic

2. Fact-finding mission; providing us with data sources, prior analyses, etc.

3. Data analysis and creating charts (see below)

Where AI has played a supporting role, our policy is always to check the output for any mistakes it might make. Unlike others, Recruitonomics is not in the business of bringing you AI-hallucinated research output (I’m not going to mention names but you can read about some prominent examples in the papers).

4. We use AI for data analysis

This is the most obvious and exciting use case of AI, in our opinion. A lot of data analysis has become significantly faster with AI, which has helped us to write several research pieces that would have previously taken up too much of our time.

Here is an example: our recent analysis of German jobs with worker shortages. For some reason, the original data cannot be downloaded in one file but rather in three batches. We used Claude to translate all 519 professions from German into English. It also helped us to combine the data into a single file, to create the ranking for all jobs, and to run the correlation analysis between wage growth and the occupation shortage score. Doing all of this manually would have required hours of work from a research assistant.

5. We use AI for creating charts

Another obvious use case. While many of our charts are produced with Macrobond, AI has made it significantly easier to create Appcast-formatted charts using other data sources.

6. We *sometimes* use AI for idea generation

None of our articles have been thought up by AI — it plays a supporting role. We do use AI to bounce ideas around and bulletproof our own arguments and research, but the core ideas and data analysis are always generated by the Recruitonomics team. Rest assured, we are doing the hard thinking ourselves! And if this were ever not to be the case, our policy is to inform you upfront.

In this piece, we’ve spelled out the most important points of our AI policy because we believe you should know how we use AI in research and in writing. Our internal AI policy guideline is a longer, more detailed document than the overview we provided above. If you have any further questions or concerns about how the Recruitonomics team is using AI, do not hesitate to contact us: julius.probst@appcast.io

Great GDP figures offer some relief…

GDP figures offered some relief earlier this month as the U.K. economy beat expectations by a wide margin. Growth came in at an annualized rate of 2.5% in the first quarter and 1.7% in the second quarter of this year. Just like for the English soccer team, though, a solid performance in the first half is typically followed by a stark second-half collapse. This has been the case for several years in a row, and this year is unlikely to be any different. Economists expect that the negative growth effects from the oil price shock will materialize in the coming months as household energy bills continue to rise. Furthermore, both businesses and consumers will be careful with their spending decisions in the weeks to come as they anxiously await the next Labour Budget. While some economists have wondered whether the Office for National Statistics (ONS) is not getting its seasonal adjustment right, it is more likely that the U.K. GDP figures in recent years have been subject to a political cycle: the two previous Autumn Budgets have been surrounded by extreme policy uncertainty, dragging down the economy in the second half of the year. And before Labour was in power, Liz Truss damaged the economy tremendously with her ill-advised mini-budget in September 2022, and was ousted as prime minister shortly thereafter. The recurrent growth drag after summer has been due to a combination of bad luck and bad policymaking rather than anything else.

…but the labor market continues to shed jobs

July’s job numbers show that close to 13,000 jobs have been lost, while the numbers for the June jobs report were revised down and now show a similar decline of 13,000. This brings the cumulative job loss since the fall of 2024 to about 190,000.

The sectoral composition of the job losses remains unchanged. Retail is down by about 140,000 since January 2024, and hospitality by 100,000. Most other industries are stagnant, except for the tech sector (information and communication), which has lost some 83,000 jobs since then. As in many other advanced economies, healthcare remains the biggest source of job creation in the U.K., adding about 145,000 jobs over the last two-and-a-half years.

Labor demand keeps falling even as the unemployment rate is steady

The unemployment rate remains steady at 4.9%, defying the more pessimistic forecast from the Bank of England (BoE) for now. While monetary policymakers project a gradual increase to 5.3% by the end of the year, it now looks more likely that unemployment will hover around 5% for the time being, as has been the case since the spring.

Meanwhile, labor demand is still falling as employers dial back recruitment. The total number of vacancies in the U.K. fell to 707,000 — the lowest value since 2015. Worker churn in the U.K. has come to a standstill, with companies refraining from hiring and workers unable to switch jobs. For jobseekers, this is simply a terrible market. And the lack of labor market dynamism will cost the economy dearly in the years to come if we do not see an uptick anytime soon.

Young workers are suffering the most from the labor market slowdown. The National Insurance Contribution increase and the minimum wage hike under Labour have led to surging employment costs, with retail and hospitality cutting down part-time roles and summer roles that have historically offered opportunities for younger people. Youth unemployment has jumped to about 14.6% as a result, its highest value since the years following the Global Financial Crisis. The much higher prevalence of remote work since the pandemic and AI adoption are two additional headwinds for graduates, aggravating Britain’s youth job crisis.

Wage growth continues to moderate. No surprise there, given the weakness of the labor market. There is a strong divide between private and public sector pay, with the latter outperforming by about 2.5 percentage points. Lower pay gains are not good for workers, but the BoE will be relieved by the lack of wage pressures. It will allow for a more moderate monetary policy response following the oil price shock, as there is currently little indication that wages will drive up inflation further (so-called second-round effects).

What does this mean for recruiters?

GDP is going up even as payroll employment in the U.K. continues to fall. How is that possible? Well, it looks like British workers are becoming more productive. While it is too early to be certain, there are signs that AI adoption is leading to a productivity revival. Is AI then causing employment to fall? Perhaps for graduates — but the broader job losses, including for young workers, are concentrated in retail and hospitality, two sectors with little AI exposure. The sluggish labor market is the result of domestic policies and international headwinds like the oil price shock. As these effects are dragging on, Burnham’s government should pursue growth-friendly policies that support job creation rather than hinder it. For recruiters, this means job postings will keep attracting a large volume of applicants — so the challenge shifts to identifying the right candidate, while some well-qualified job seekers may be hesitant to move in such a sluggish economy.

Photo credit: Emilio Takas

Earlier this year, President Donald Trump nominated Kevin Warsh to be the new chairman of the Federal Reserve (Fed), America’s central bank, which is responsible for price stability and setting interest rates. Monetary policy has an outsized influence on inflation, wages, and employment trends. In fact, there are few things that matter more. Price pressures have remained elevated since the pandemic, and inflation has been accelerating again through 2026. The AI investment boom is driving up input prices and pay in the industries most exposed to it. With financial markets questioning Fed competence at a crucial time, there is a risk that monetary policymakers are losing control of the nominal economy. This should concern workers and employers alike.

Warsh’s latest press conference confused markets

Warsh was an odd choice. Trump is a self-proclaimed low-interest guy, while the new chairman has historically been known as an inflation hawk — in the aftermath of the global financial crisis, he was more concerned about inflation than persistently high unemployment. But since his appointment, Warsh’s attitude might have shifted. It’s hard to know for sure, since his signals have been anything but clear. Financial markets were left confused after the last press conference two weeks ago when the Fed left rates unchanged. Warsh doesn’t believe in forward guidance — offering a guess about the future path of interest rates to steer markets. Removing that from the central bank’s toolkit is all well and good, but it doesn’t work if the chair is not 100% explicit about the Fed’s reaction function — the rules of how monetary policy will respond to economic outcomes. And he wasn’t. This left investors guessing and resulted in a substantial spike in long-term interest rates: 10-year government bond yields rose by seven basis points on the day of the press conference. In case you didn’t know, this is a big deal! The U.S. bond market is one of the largest and most liquid financial markets in the world. Such a surge in interest rates is not just a harbinger of macroeconomic volatility; it also shows that investors are expecting inflation to increase.

Inflation is rising again

You might now object that the acceleration is a result of the oil price shock, and there is some truth to that, as we pointed out earlier this year. But core inflation — a measure stripping out volatile food and energy prices — is accelerating too: the core Personal Consumption Expenditures (PCE) rate is exceeding 3%, while the Fed is supposedly targeting an increase of 2%.

The US is experiencing a surge in nominal spending

There is a straightforward explanation for why underlying inflation is rising, and it has nothing to do with energy shocks: The U.S. economy is experiencing a nominal spending boom. As a reminder, real GDP growth basically means producing more output with the same resources (it’s an efficiency gain), while nominal GDP growth is the change in the total dollar value of all goods and services in the economy (nominal growth is the sum of real GDP growth and inflation). A spending surge might simply drive up prices and wages across the board without leaving anyone better off.

This is exactly what’s happening right now. Following the post-pandemic economic boom, nominal GDP growth finally slowed to a healthier 5% by mid-2025. However, in the second half of last year, it reaccelerated, surpassing 6% in the first quarter of 2026. Even more shocking, the latest data shows it growing by 7.9% in the second quarter, a level that is roughly 3 percentage points too high to be consistent with the Fed’s inflation target of 2%. For the third quarter, the Fed’s GDP Nowcast currently anticipates 5.8% real growth, which would be consistent with more than 8.5% nominal growth. This miss represents a spectacular failure in monetary policymaking, with the Fed severely underestimating the strength of the current inflationary boom. How come, you ask?

The AI investment boom is inflationary

Economists are currently debating whether AI is inflationary. If the technology produces large productivity gains, this could very well reduce inflation. An investment and consumption boom, on the other hand, would be inflationary, at least in the short run.

While Warsh has positioned himself on the side of AI lowering inflation, the data suggests the opposite is the case. Large U.S. tech companies are on track to spend $1 trillion this year on capital expenditures. The data center construction boom is about to surpass previous technological cycles, such as the dot-com era, in terms of investment committed. And the infrastructure spending is starting to push up input prices and wages, driving up construction costs. Meanwhile, stocks are surging and American consumers are spending their money faster than ever. This wealth-driven consumption boom is another factor pushing up inflation.

Is the Fed correcting course?

While several Fed governors recently indicated that they are uncomfortable with current policy and would consider hiking interest rates soon, the weak employment numbers might have thrown a wrench into that plan. Prediction markets show that the probability of a September rate hike fell from 60% in early August to 40% after the jobs report, and to 34% following today's CPI release, even though inflation remains well above the Fed's 2% target.

Why more demand won’t create many jobs

A significant nominal spending boom such as the one the U.S. is currently experiencing would, under normal circumstances, be quite bullish for job creation. But here is the problem. By most measures, the U.S. labor market is already close to full employment. The unemployment rate is low and labor force participation high. The aging workforce and Trump’s immigration policies have reduced breakeven job growth — the level of job creation consistent with stable unemployment — to about 50,000 jobs per month. This means that all the additional spending from the AI boom is facing severe supply constraints. Instead of boosting employment, it’s simply pushing up prices and wages.

What does this mean for recruiters?

The Fed has allowed the nominal economy to grow at a much faster pace than warranted. The end result will not just be higher inflation, but also higher wages. With job creation constrained by demographics and migration policies, workers will do their best not to let higher prices erode their purchasing power. And the AI boom is giving them plenty of ammunition. We are seeing a surge in demand for workers with AI skills. Many healthcare occupations also remain extremely hard to fill. And above all, hiring for any job related to data center construction is booming. Following two years of moderate wage pressure, recruiters should anticipate compensation demands creeping up in these segments, with potential knock-on effects for the rest of the labor market. While good for workers, this will become a problem for squeezed employers who can’t afford more wage competition.

Photo Credit: George Bakos

The Spring shoots of a strong job market have withered in the summer heat. The rising optimism that the labor market was perhaps strengthening took a big hit with the latest jobs report. July payroll employment declined by 23,000, a surprisingly bad reading, and yet the unemployment rate ticked down a notch, to 4.1%. On the surface, this seems puzzling: slowing job growth and less unemployment. So, let’s unpack the details to make sense of this seeming contradiction.

No hot streak for employment this summer

It’s not just that July saw negative job growth. May and June also had a combined 103,000 in downward revisions. This brought down the three-month average in job growth to 20,000. If it’s any solace, we can call the Spring surge an anomaly and this new subdued trend merely reversion to the mean — consistent with the state of the labor market in the winter.

Local government jobs were the main drag, declining 50,000, which could be due to seasonal distortions (due to educators largely being out of work for the summer). Retail lost 19,000. Financial activities jobs were down 14,000.

Leisure and hospitality has been at the epicenter of the summer swoon — losing over 80,000 jobs in June and July alone. This is very much contrary to expectations, with many reports anticipating a World Cup boom, which clearly did not materialize.

And healthcare — long the stalwart industry of the job market — posted a lackluster gain of 22,000 in July, which is far below its average over the last year; this was driven by a decline in hospital hiring (-400), which could be related to looming Medicaid cuts.

Labor force shrinking alongside weak job gains

The unemployment rate ticked down, but for “bad” reasons — because the labor force shrunk. In other words, fewer people are bothering to even look for work. That could be either because they’re discouraged in this tough market for those without a job, or because of broader tightening in the pool of workers, such as through immigration policy.

Other measures of the labor force were more subdued. For prime-age workers, both the employment-to-population ratio and the labor force participation rate bounced back in July, to 80.4% and 83.4%, respectively. These increases in the share of prime-age adults with a job, or at least looking for one, are encouraging — but they come on the heels of steep falls in June. But we did not see a rebound in the sharp drop for younger adults, those 25-to-34 years old.

The sharp drop in the labor force participation rate for younger professionals (25-to-34 years old) remains a worry. Economists at the Federal Reserve Bank of Minneapolis recently reported that this drop may be explained by a large increase in layoffs among these workers, resulting in many leaving the labor force altogether.

So overall, the labor market seems to be tightening from a supply perspective. Yet despite that, wage growth slowed to 3.2% year-over-year, a sign that the pool of job seekers may be falling faster than job growth is decelerating, perhaps related to more restrictive immigration policies.

What does this mean for recruiters?

This is a puzzling jobs report, honestly. Overall job growth has receded from its surge earlier this year, as most industries outside of healthcare and construction remain weak. Yet, unemployment is falling because there are fewer people looking for work. If you are a recruiter hiring for specialized front-line roles like HVAC technicians or healthcare specialties, competition likely remains elevated. But, if you’re hiring for hospitality or service workers like bartenders or waitstaff, demand is likely below its peak several years ago since the World Cup did not significantly boost hiring. In summary, the labor market is back in a state much closer to 2025: a low-hire, low-fire environment.

Photo credit: Etienne Girardet

Yes, the title is borrowed from an earlier article we published on the U.S. using Appcast’s proprietary Recruiting Difficulty Score. In this piece, we rank the hardest-to-fill occupations in Germany based on official labor market data. We also show how worker shortages are highly correlated with vacancy duration and wage growth.

Germany’s occupation shortage ranking

Germany’s Federal Employment Agency has created a worker shortage analysis for 519 distinct occupations. These are sorted into three different groups according to their skill and education requirements.

1. Skilled workers: “Fachkräfte” in German, which loosely translates to skilled workers. These are jobs that require completed vocational training (typically 2 to 3 years) or a comparable qualification, covering skilled tasks such as those of an electrician, nurse, or cook.

2. Specialists: Jobs needing qualifications beyond basic vocational training, such as a master craftsman (“Meister”), technician diploma, or bachelor’s degree. They typically involve more complex work with planning or supervisory responsibility.

3. Experts: Highly complex roles that generally require at least a four-year university degree (master’s level or above), spanning leadership, research, and strategic or highly specialized professional work (e.g., physicians, engineers in senior roles, and academics).

Note how this classification leaves out any job with minimal skill or educational requirements. This is by design, as such occupations are arguably not constrained by labor shortages.

The occupation shortage score is based on six different indicators, each capturing some aspect of labor market tightness.

1. Median vacancy duration: A hiring difficulty measure capturing how long it takes to fill a job.

2. Jobseeker-to-vacancy ratio: A measure of candidate supply versus labor demand.

3. Unemployment rate by occupation: A measure of labor supply.

4. Employment change of foreigners: A measure of hiring difficulty. It captures how employers respond to domestic labor constraints.

5. Exit rate of unemployed workers: This captures the speed at which workers within an occupation re-enter the labor market.

6. Median wage growth: A measure of wage pressure reflecting competition among employers for labor.

Here is how the score works. A value below 1.5 indicates that the occupation does not have any worker shortages (“no bottleneck”). Jobs between 1.5 and 2 are “under observation”, while any occupation scoring 2 or higher is classified as a “bottleneck occupation”.

The 20 jobs with the highest shortage score

Two things stand out when looking at the list of the 20 hardest-to-fill jobs below. Just like in the U.S., recruiting for certain healthcare roles is extremely difficult. A rapidly aging society leads to surging demand, while licensing restrictions and educational requirements constrain candidate supply. Physiotherapists, dental assistants, and nurses are among the jobs with the highest shortages, while many of the other occupations are related to infrastructure. What all of them have in common is that they are “physical jobs” — by that, we mean that they require a physical presence and cannot be performed remotely.

Fact 1: Jobs requiring less education face bigger worker shortages

The next table summarizes how many jobs are in each shortage category for the three different skill levels. What is striking is that skilled workers — needing the lowest degree requirement — experience the highest occupation shortages. 36% of jobs in the skilled worker category are bottleneck occupations, with another 32% being under observation. This is higher than for specialists and experts. Jobs with the highest degree requirements are, ironically, more often classified as no bottleneck.

Fact 2: Jobs requiring less education take longer to fill

One of the more relevant metrics going into the shortage score is vacancy duration. It is extremely costly for companies to leave jobs unfilled. Elevated vacancy duration is therefore a good indicator of recruitment difficulty. The data shows that positions for skilled workers take by far the longest to fill across all shortage categories. The gap between experts and skilled workers ranges from 19 days in no-bottleneck occupations to 32 days in bottleneck ones.

Fact 3: Jobs requiring less education see faster wage growth

The law of supply and demand also holds for the labor market. All else equal, an increase in demand causes prices to rise. For workers, this means higher wage growth in occupations with a higher shortage score. As expected, bottleneck occupations have experienced much faster pay gains compared to no-bottleneck occupations over a three-year period between 2021 and 2024. For skilled workers, the difference is 3 percentage points, while for experts it’s closer to 4.

Skilled workers are experiencing significantly higher wage growth across all categories, while wages for experts are slightly more sensitive to the occupation shortage ranking. This likely reflects tighter, more specialized labor markets where scarce experts can command bigger premiums relative to their peers. Skilled-trade wages, on the other hand, are more anchored by collective agreements and broader labor supply.

Using data for all 519 jobs, we find that a 1-point increase in the shortage score is associated with a 3.8 percentage point increase in three-year wage growth. Across the observed score range (about 0.3 to 2.8), the line rises from about 7% predicted wage growth at the low end to 17% at the high end. While the relationship isn’t perfect, occupation shortages are an important determinant of compensation trends.

Fact 4: Infrastructure is facing the biggest labor constraints

Digging deeper into the skilled trade category, we find that a significant share of high-labor-shortage occupations is related to infrastructure. Powerline maintenance, crane operation, and railway, road, sewage, and pipeline construction are all occupations that exhibit both very high shortage scores and elevated wage growth. This is a harbinger of things to come as the German stimulus funds are finally being deployed. After decades of underinvestment, infrastructure spending is soaring, with funds for railway investment projected to be around €20 billion this year — up from less than €10 billion just a couple of years ago. Even adjusted for inflation, that's more than 50% above pre-pandemic levels.

However, economists anticipate that this rapid inflow of money will aggravate supply constraints, particularly when it comes to the available workforce. As our data shows, skilled-worker occupations are already topping the shortage list. About a third of businesses in construction report that worker shortages are constraining their output, a much higher share than just a few years ago.

It is very likely that these problems will only get worse in the coming years due to rising demand. Germany’s fiscal stimulus might therefore run into some considerable supply constraints, with input prices soaring and projects being delayed due to domestic worker shortages.

What does this mean for recruiters?

We have shown in prior research how the AI economy is creating some unexpected winners, namely specialized blue-collar workers in infrastructure-related roles. The data center construction boom, the green energy transition, higher global defense spending, and rising healthcare needs are all increasing the demand for physical workers.

Zooming in on the German labor market, we see this happening. Our list of the 20 hardest-to-fill jobs is dominated by roles in healthcare and skilled trades, particularly in construction and infrastructure. They are experiencing rapid wage growth and significantly longer vacancy duration, as recruiters struggle to fill these positions. This is, of course, exactly what one would expect to see in sectors where rising demand meets constrained labor supply. If you were hoping for conditions to improve, I’ll have to disappoint you. With Germany’s fiscal stimulus colliding with the country’s rapidly aging workforce, recruiting difficulties for many of these roles will only increase.

Last call to join us: The Recruitonomics team is hosting a Substack live event on Aug. 7 to break down the U.S. July jobs report, released earlier that morning. Use this link on the day!

In case you haven’t seen this: The Recruitonomics team is going to host a Substack live event on Aug. 7 to break down the U.S. July jobs report, released earlier that morning. Use this link to join us on the day!

And below, you can find an overview of all the articles we published in July. Keep reading for data releases coming up in August and other interesting recruitment and labor market insights.

Upcoming Economic Data Releases and Events

• August 7: US Employment Situation Report

• August 12: US CPI

• August 13: UK GDP (monthly estimate, June 2026)

• August 14: Eurozone GDP (flash estimate, Q2 2026) and employment data

• August 18: UK Labour Market Overview

• August 19: UK CPI

• August 19: Eurozone CPI (final July reading)

• August 19: Eurozone vacancy statistics

In recent news:

Julius Probst, PhD

Do Not Trust Vibes-Based Data!

The U.S. economy continues to perform extraordinarily well. Underlying GDP — a measure of domestic demand in the economy — shows that the U.S. was growing at an annualized rate of 2.8% in the first half of this year. And while it is true that the data center construction boom is contributing, most of the growth is driven by consumer spending. This shouldn’t surprise us, given that consumption makes up almost 70% of the economy. Even as the oil shock has driven up inflation globally, American consumers have not tightened their belts in a meaningful way so far.

Here's the weird thing, though. You wouldn’t know it from observing Americans’ spending patterns, but consumer confidence in the U.S. is currently at an all-time low. The University of Michigan index shows a value as low as during the Great Recession in 2009. Even the alternative Conference Board measure shows a steep decline over the last couple of years. Neither reflects in any meaningful way that the economy continues to perform well, that the stock market has risen for years, and that the labor market is close to full employment.

We also do not believe the popular theory that most of the consumer spending today is driven by the top 10% of earners, while everybody else is suffering. Data from bank card transactions shows that consumer outlays have held up well across all income groups.

Vibes are simply bad! And this also extends to the labor market. Even with unemployment at a historic low, fears about a labor market downturn remain historically elevated. Just as with the other metric, we need to go back all the way to 2008 to see a similarly high share of negative responses.

Global shocks and AI obviously play a role in shaping current sentiment. A lot of data shows that workers have FOBO — the fear of becoming obsolete — as AI disrupts the workplace. Sentiment is also increasingly shaped by partisanship: when your side holds the White House, the economy looks great; when the other party runs things, it looks bleak. If the Michigan survey really is biased toward Democrats, that would help explain the grim numbers.

Either way, there has been a fundamental disconnect between sentiment data and how the economy is actually performing. This vibecession, as some economists have called it, has now been going on for several years. But there is currently no reason to believe that the economy or labor market will fall off a cliff anytime soon — I know, famous last words! GDP is expected to grow at more than 2% this year, payroll employment has picked up in recent months following a severe slowdown at the end of last year, and high stock market valuations are boosting consumer spending. Moreover, data center construction has taken off, creating tight regional labor markets where the investments are taking place. California’s economy is growing at a stunning rate again, buoyed by an inflow of capital into the AI economy. Experienced workers with AI skills are in high demand, seeing their compensation soar.

When it comes to which indicators are more reliable, it’s an easy pick for me. Sentiment data has been untrustworthy for years now. To get a sense of where the economy is headed, look at what consumers are spending their money on, and where companies are hiring and who they're bringing on. Actions speak louder than words!

Photo credit: Annie Spratt

Global labor markets have weakened in recent years. The substantial decline in vacancies has made it more difficult for jobseekers to find new job opportunities in today’s economy. In this “low-hire, low-fire” labor market, one group has suffered disproportionately: junior workers. Job postings for entry-level roles have fallen significantly more than those for experienced professionals. The technological disruption caused by AI is the obvious culprit. However, some research suggests the increasing prevalence of working from home (WFH) could be responsible.

We will look at how both channels affect young jobseekers, and which one plays the bigger role.

The labor market is tough for young jobseekers

Let’s start with the facts: the labor market has clearly worsened more for young people than for experienced workers. Data from ADP — a payroll service company — shows that the private sector continues to create jobs for mid-career and senior professionals. Early-career employment, on the other hand, has fallen since 2023.

Nowhere is that gap as striking as for software developers. Early-career employment has fallen by a stunning 20% (ages 22-25), while mid-career employment (ages 41-49) is up by 21%.

What’s interesting is that this trend is unfolding simultaneously across advanced economies. The deterioration in early-career job prospects is being aggravated by the use of AI, with some jobseekers sending out hundreds of applications without getting a foot in the door. While employment for young people started to dip around the time ChatGPT was released, graduate hiring had already been falling for a year before then, predating the widespread adoption of AI. This strongly suggests that AI cannot be the only factor causing this.

Why remote work is hurting early-career jobs

The COVID-19 pandemic significantly transformed how the labor market functions for some workers. While some employers are trying hard to get workers back to the office every single day, the reality is that labor markets have settled in a new equilibrium: the share of jobs offering remote or hybrid work has remained elevated, holding at about 12 to 16% in most countries since the pandemic. Switching to a more WFH-friendly employer if push comes to shove is always a viable option, making it less likely that most companies dial back hybrid work.

While the U.S. looks like an outlier on this chart, data from the Bureau of Labor Statistics confirms that more than 10% of all workers are fully remote, and another 11% are hybrid. Maybe U.S. employers simply don’t advertise this benefit aggressively enough on Indeed?

For experienced staff, the upside of remote work is obvious: lower commuting time and cost, the option to live in a cheaper area, etc. But this new reality might quietly tilt the labor market against young workers.

Why, you ask?

Young workers with little or no work experience require significantly more training and hands-on supervision. A lot of the early-career skills are absorbed through proximity to colleagues, including spontaneous mentoring and coaching. This mechanism is disrupted in a fully remote setting, increasing the cost of inexperienced hires. As human capital accumulation builds more slowly, the return on hiring young workers goes down, while the cost rises. Due to the longer payback horizon, graduate hiring falls. Some studies have recently asserted that a big chunk of the decline in graduate hiring is due to WFH.

What about AI?

On the other hand, a separate strand of literature is blaming AI. The mechanism here is more obvious. AI is a labor-displacing technology that can do a lot of the grunt work that graduates were formerly doing at a fraction of the cost — that’s the argument put forward by some executives, at least. And there is obviously some truth to that. Graduate employment across investment banking, consulting, and large tech employers has fallen, as technology has been deployed to do some of the work.

However, it is not entirely clear yet to what extent AI is a labor-displacing technology. A new study shows that firms with high AI adoption are actually hiring at a faster pace than companies that do not adopt it. More interestingly, AI-intensive firms also seem to hire more junior graduates today than the rest of the market. Now, this effect might simply arise because these companies have much higher revenue growth than the rest of the economy. It's therefore not surprising that they also see a faster increase in headcount for now. But the authors try to control for this by comparing early AI adopters with similar companies that adopted AI a little later — and the result holds: they still hire more juniors.

Source: A New Look at AI’s Impact on Jobs: Firm-Level AI Spending and Workforce Adjustment

Why researchers struggle to find the definitive answer

Here is where it gets tricky though. For each occuapation, we combine a measure of AI exposure from the Budget Lab with data on the WFH share. Our analysis shows that the correlation between the two is extremely high — 75.6%, to be precise, based on about 700 different occupations in the U.S.

The problem is that statistical inference becomes more complicated when two variables are so highly correlated. When researchers try to estimate the effect of AI on junior roles, they might inadvertently pick up the WFH effect instead — and vice versa! Previous research that has not taken this into account is therefore likely biased.

Where do we come down?

In my opinion, Lambert and Schindler’s paper on the broken career ladder for young workers has one of the more credible research designs for disentangling the two labor market shocks. The authors document the significant correlation between AI and WFH exposure. In their statistical analysis, they find that each metric on its own explains a significant part of the decline in junior hiring. But when estimated together, the AI effect disappears, while the WFH effect remains highly significant. AI might therefore not be the main culprit at all — it’s apparent effect might simply be the WFH channel working in disguise.

Of course, their study is not the final verdict on this topic. Moreover, technology is evolving rapidly, while the share of WFH jobs has stayed constant in recent years. Even though this doesn’t seem to be the case today, it is possible that the AI effect on graduate hiring might dominate the WFH effect in the future.

What does this mean for recruiters?

The labor market for young people has worsened significantly, with entry-level job openings at a decade low. While many blame AI for displacing these jobs, economic research suggests that the WFH channel is more important as it raises the cost and lowers the return on inexperienced hires. We also shouldn’t forget the sluggish macroeconomy, constrained by high interest rates, supply-side shocks, and global uncertainty. These factors have also weighed on jobseekers’ prospects.

If you are working in recruitment, you might have a good understanding of whether WFH, AI, or a combination of both has contributed to your company hiring fewer young workers. Either way, the downstream effects of depressed graduate hiring will be felt in the coming years. Let’s not forget that many advanced economies face a retirement tsunami as the large cohort of baby boomers is gradually leaving the workforce. Even with AI, many companies could experience severe labor shortages down the line. But right now, building your young talent pipeline is cheap. Employers should take advantage of this moment, or risk scrambling for young talent again when the market is tight and competition fierce.

Photo credit: Andriy Blokhin

Have you ever wondered what the hardest-to-fill jobs are in the U.S.? Well, lucky for you, we have the answer!

To create this ranking, we use Appcast’s proprietary Recruiting Difficulty Score (RDS) developed by Sam Kuhn. The metric is designed to measure how challenging it is for employers to hire for a given occupation. For that purpose, it is not enough to simply look at the jobs with the largest worker shortages. Instead, we focus on occupations with the highest ratio of active job postings to total employment — a measure of demand relative to the size of the available workforce. Our metric also considers median posting duration, which shows how long a job advertisement remains active. Occupations with exceptionally high hiring needs relative to candidate supply, combined with elevated time-to-hire, receive the highest RDS.

1. Special education teachers

Contrary to what many would predict to be the hardest occupation to fill in the U.S., it is special education teachers who take the No.1 spot. Despite earning comparable pay to their general education peers (about $65,000 per year), special education teachers face significantly greater demands on the job. Another issue is that fewer people are entering the field, while the number of students who require special education services continues to increase. In March 2024, 51% of public schools nationwide reported that they would need to fill positions in special education. All these factors leave candidate supply short of demand in today’s labor market.

2. Counselors

The first of many healthcare occupations on this list, counselors are extremely hard to hire in today’s labor market. Becoming a licensed counselor in the U.S. requires a long process. Candidates must earn bachelor’s and master’s degrees, accumulate 2,000 to 4,500 hours of supervised clinical experience depending on the state, then pass a licensing exam. All told, that puts most counselors in the job market roughly eight to nine years after starting college. A broader pipeline of candidates, along with a slightly more stable and less demanding day-to-day, is what keeps this occupation just below special education teachers.

3. Dentists

Like counseling, dentistry requires eight years of schooling before a candidate reaches the job market. This, along with an aging U.S. population, means demand is rising faster than supply can keep up. Being a dentist also means missing out on the remote or hybrid perks many of their peers enjoy. You can’t do a root canal over Zoom. However, thanks to the occupation’s strong pay (exceeding $170,000 per year), young people still choose this path over many others, keeping the ratio of active job postings to employment slightly lower than the two above it on this list.

4. Magnetic resonance imaging (MRI) technologists

The most specialized roles on this list so far, MRI technologist positions are becoming increasingly hard to fill in 2026. As the population ages, demand for MRIs increases, making the need for skilled technologists to operate these machines even more critical. The hiring challenge is significant enough that many facilities have opted to upskill existing CT or X-ray technologists in-house rather than take on the cost and difficulty of recruiting externally.

5. Pediatric surgeons

Much like dentists and counselors, pediatric surgeons have a long way to go even after they graduate from college before they hit the job market. Along with eight years of schooling, they must pass licensing exams, complete a five-year surgical residency and a two-year fellowship, and then receive specialty board certification. Also, like many on this list, all of the work must be done in person. What keeps this occupation lower on this list is the number of pediatric surgeons in the U.S. These specialists are concentrated in a few major metropolitan areas. Smaller and rural hospitals often can’t afford — or don’t need — these surgeons, which caps how high demand can realistically climb.

6. Obstetricians and gynecologists (OB/GYNs)

For many of the reasons listed above, OB/GYNs are becoming increasingly hard to hire. High education requirements, lengthy residencies, extensive exams, and letters of recommendation all discourage younger people from entering the field. Paired with an aging workforce and high burnout rates among OB/GYNs, this causes demand to skyrocket. However, high compensation attracts a fair share of candidates, and the field is one of the smaller ones on this list. This places OB/GYNs at No. 6 on the Recruiting Difficulty Score.

7. Electrical and electronics installers and repairers (transportation equipment)

Just below OB/GYNs at No. 7 is the first occupation on this list outside education and healthcare. This is an extremely niche job with tasks that include the installation and maintenance of electronic communication equipment. As technology evolves rapidly, technicians increasingly need proficiency in areas they were never expected to master before. Modern transportation systems are software-driven rather than mechanical. As this occupation becomes less blue-collar, the talent pool shrinks. The candidates who would thrive in roles like this often become data analysts and software engineers instead, leaving recruiters scrambling to fill these positions.

8. Psychiatrists

Mental health demands have soared over the last decade, putting significant pressure on the supply of professionals in sectors like psychiatry. This spike in demand is compounded by the lengthy education requirements for psychiatrists, which means candidates can spend an entire decade training before they are even eligible to be hired. Notably, Lightcast data shows that 31% of employment for psychiatrists is within physician offices and medical group practices. These practices generally face greater hiring challenges because they offer lower compensation and fewer benefits, and they have smaller recruiting teams. Together, these conditions have made psychiatrists increasingly difficult to hire in the U.S. labor market.

9. Sales representatives (technical and scientific products)

Taking a different turn from many of the previously listed occupations, technical and scientific sales representatives have steadily become harder to hire in the U.S. Workers must typically acquire specific knowledge that requires lengthy training and education, while they also need to be skilled in persuasion, relationship-building, and closing deals. It can take up to 10 months for a new hire to reach full productivity. This causes hiring managers to be more cautious when evaluating candidates, extending the time-to-fill for these specific roles and contributing to their high RDS.

10. Cardiovascular technologists and technicians

As cardiovascular issues climb with the aging population, demand for cardiovascular technologists rises alongside them. Highly specialized training and certification requirements, along with grueling on-call shifts, leave candidate supply well below what is needed. Hospitals also compete with staffing agencies for the same pool of certified technologists, since travel and contract assignments typically offer higher hourly pay and more control over scheduling. The certification and schooling required to enter this occupation do not offer much career mobility, so younger students often choose more generalized healthcare paths instead. These factors lead to a limited applicant pool in an occupation where demand keeps rising.

What does this mean for recruiters?

Looking at this list, a clear pattern emerges — healthcare occupations are consistently among the hardest to hire for in the U.S. With expensive, rigorous, and lengthy education requirements, plus residencies and certifications to complete, it is no surprise that these jobs are more difficult to fill than others. All the occupations above require effort and highly specialized skills, while also being unsuitable for working from home, making it rarer for young people to choose these fields.

This isn’t to say that you should worry about running out of doctors anytime soon. Rather, the data suggests healthcare recruiters will struggle more than most in today’s labor market. For these difficult positions, recruiters typically need to spend significantly more to attract suitable candidates, which means a higher cost-per-application compared to the industry average.

This piece was written by our summer intern Logan Umbach, an undergraduate studying economics at Bates College. Sam Kuhn provided the analysis behind the ranking.

This is a pivotal moment the U.K. economy. Yesterday, Andy Burnham became Britain’s new prime minister, arriving at Downing Street to deliver his first speech in office. In a surprise decision, John Healey was announced as chancellor, an apparent signal that the new government will not throw fiscal orthodoxy completely to the wind. Despite that move, financial markets were rattled a little by some of Burnham’s early announcements on higher government spending, with cutting household costs among his key priorities. Interest rates on long-term government bonds increased initially on Monday following Burnham’s first speech but have stabilized since. Employment figures offer further relief for the new government, with the job market seemingly stabilizing for now after being hit by the energy price shock earlier this year. The unemployment rate remains steady, while payroll employment is contracting marginally. Wage growth is falling to the lowest level since 2020, which will allow the Bank of England (BoE) to keep interest rates on hold.

The job market is stabilizing

Contrary to expectations, the unemployment rate remains unchanged at 4.9% despite the economic fallout from the new energy price shock. As a result, the BoE’s forecast of unemployment rising to 5.3% by the end of the year is probably a tad too pessimistic. While some concerns about the data accuracy of the household survey remain, payroll job figures confirm that the labor market has stabilized.

Job growth throughout May and June now stands at zero, with May’s job gain of about 3,000 being canceled out by a contraction of similar size in the following month. While not spectacular by any means, the figures are better than anticipated, given elevated global uncertainty and rising energy prices. Furthermore, April’s payroll job losses were revised down to about 30,000, bringing the cumulative job loss since late 2024 to about 170,000. As we anticipated, the initial figure of 100,000 job losses for April recorded a couple of months ago was always likely to be revised substantially.

Labor demand remains muted

The total number of vacancies in the U.K. remains relatively steady at 712,000, its lowest level since late 2014, confirming what basically everybody knows: this is one of the toughest markets for jobseekers in decades as hiring remains depressed.

This trend is also borne out by Textkernel's online job-advertisement data, with U.K. job postings in the first half of this year running below levels seen a year earlier. All in all, hiring demand remains very weak, especially in the private sector.

Young people are bearing the brunt

While the aggregate unemployment figure has remained reasonably steady over the last year, youth unemployment continues to rise. No wonder, given that job postings for entry-level and junior roles have plummeted the most. Domestic policies like the minimum wage hikes and the increase in National Insurance contributions have led to a surge in employment costs, especially for young and part-time workers. As a result, payroll jobs for workers aged 24 and younger have fallen by about 150,000 since January 2023. Over the same period, employment among middle-aged workers has grown by about 420,000.

If you think that artificial intelligence is the culprit, you might want to reconsider. Most of the job losses in the U.K. have been concentrated in retail and hospitality, two sectors that have relatively low AI exposure. These industries — supermarkets, high street stores, local independent restaurants and cafes — offer flexible, part-time positions that require little prior experience, which makes them a natural fit for younger jobseekers. Unfortunately, those opportunities have dried up as businesses have struggled with rising labor costs amid stagnant consumer spending.

Wage growth shows further weakening

While falling wage growth together with rising inflation is obviously bad news for workers, it is a relief for the BoE. Although we can surely rule out a rate cut as the Iran conflict drags on, muted wage growth is giving monetary policymakers a reason not to hike. With the labor market as sluggish as it is, fears of a renewed wage-price spiral as seen during the post-pandemic recovery can be safely dismissed. In fact, private-sector wage growth is at its lowest since 2020.

What does this mean for recruiters?

For recruiters, little is changing for now. The job losses since the beginning of the Iran conflict are more benign than what was initially feared. At the same time, hiring remains at a multi-year low. It’s a terrible market for jobseekers, with young people hit hardest. In this environment, recruiters should anticipate that most job postings will attract a large volume of candidates, especially as AI makes it easier to apply to many roles.

The new Burnham government is expected to increase fiscal spending but must walk a tightrope, avoiding upsetting bond markets while working within the fiscal rules. At the very least, optimism seems to run higher than after Starmer was elected. Burnham’s plans for fiscal devolution, together with other significant reforms, might lift consumer and business sentiment — something the U.K. desperately needs. Hopefully, that translates into improving labor market conditions in the second half of the year.

Photo credit: Vienna Reyes

In our previous piece, we looked at whether the 2026 World Cup sparked a hiring boom in U.S. hospitality. The national data gave a clear answer: no. Employment in the sector fell in June, and economic research suggests that a muted response is exactly what we should expect from such mega-events.

But national figures can hide a lot. Even if the World Cup barely registers in a $32 trillion economy, its effects should be concentrated where the games are actually played — in the 11 U.S. host cities. If there is a hiring bump to be found, that’s where it would show up. That is why we zoom in and look at the local labor markets of the host cities. Spoiler alert: we still can’t find any meaningful effect.

Local trends: Comparing hosts with non-host cities

Weak employment growth in hospitality at the national level is by itself not definitive proof that the World Cup is not creating additional jobs: the sector could have contracted even more without the event taking place. To dig deeper, we therefore need to look at regional data. In this piece, we compare the 11 host cities with a group of similar non-host cities, our control group. While the U.S. cities where the games are played are somewhat larger than the non-host cities, this is driven by New York and Los Angeles as outliers.

Our analysis reveals that both groups display similar labor market trends in the run-up to the event — the most important assumption of this kind of event study. Rest assured that we also experimented with swapping metropolitan statistical areas (MSAs) in the control group, but that doesn’t seem to affect our results.

What the data says

Unfortunately, employment data at the MSA level is only available through May, just before the World Cup kicked off — pun intended. However, one would expect businesses to hire staff in anticipation of higher demand ahead of the event, not just during it. But our chart shows no meaningful difference in total employment between host and control cities. Even more disappointing, that is also true when just considering employment in leisure and hospitality.

Indeed job postings allow us to look at data all the way through June 26. There is no significant uptick in job advertisements before or during the event. And again, we fail to detect any difference between host and comparison cities.

With data from Lightcast, a labor market analytics firm, we can narrow the focus to job postings within hospitality. We identify four subsectors within accommodation and five within food and drinks that should have the highest exposure to the World Cup.

Alas, we need to disappoint you again. Even within these core hospitality postings, there is no divergence between the two city groups.

Additional checks: Difference-in-differences estimation

Feel free to skip this section as our statistical analysis shows the same non-result!

If you were worried that our previous analysis wasn’t quite rigorous enough, we also tested our results more formally with a regression model. Using a difference-in-differences approach, we estimate whether the gap between the two groups changed significantly in the weeks just before and after the tournament began.

For the BLS employment data, we use the months up to March 2026 as the pre-period, while April and May are included in our analysis as the treated period — although the World Cup only started in June, one might expect businesses in the host cities to increase headcount in anticipation a few weeks before kickoff. With the Lightcast data, we change the treated period to May and June. Our analysis includes time and metro fixed effects (FE) — these are statistical controls — don’t ask.

The two graphs below show that there is no statistically significant difference between the host and comparison cities. Every dot sits close to zero before and throughout the treated period, and the error bars always include the null effect. In plain terms: host cities were hiring staff at restaurants, bars, and hotels at essentially the same pace as everywhere else. Whatever the World Cup was about to do to host metros, a statistically significant surge in hospitality jobs isn’t part of the story — at least not yet.

Caveats to our analysis

The main issue is that the metropolitan employment data only goes through May, while the job postings data includes June but not July. Neither dataset covers the full length of the World Cup. We do not believe this to be a big problem since employers typically don’t hire at the last minute. Any meaningful effect should have already shown up in the run-up to the event and in the June job postings. Nevertheless, we will follow up with an extended analysis once we have all available data — in early September.

What does this mean for recruiters?

Zooming in on the host cities doesn't change the conclusion. When we compare the 11 U.S. host metros with a control group, we find no significant divergence in employment or job postings — neither in total metro employment, nor in the hospitality industries most exposed to the event. Our statistical analysis points to the same non-result: the cities with games were hiring at essentially the same pace as everywhere else.

For recruiters, this means the local labor market in host cities likely stayed closer to business as usual than the pre-tournament hype suggested. Competition for hospitality talent in New York, Los Angeles, and the nine other hosts was probably no fiercer than in comparable cities without the World Cup on their calendar. That doesn’t rule out smaller, shorter-lived effects. Some businesses near the stadiums certainly stretched their current staff with extra shifts, and a few may have added headcount for the tournament. But those adjustments are too localized and too brief to move the metropolitan numbers.

One caveat remains: the regional data only runs through the early part of the event. We’ll revisit these host cities once we have data covering the full tournament — so stay tuned!

Last but not least, do not forget to sign up for our Substack live event on August 7 in which we break down the U.S. July jobs report. Here is the link to the event.

Photo credit: Fauzan Saari

With the tournament in its final week, you might be wondering: Does the World Cup create additional jobs in the U.S.?

According to media reports, the spending boom associated with the event should be significant. With hundreds of thousands of tourists gathering, analysts expected the World Cup to increase hiring in hospitality. However, when looking at the data, we do not find any evidence of this. At the national level, hospitality employment has been stagnant in the run-up to the event and even fell in June, and hiring in the sector has been subdued. While this does not rule out more localized effects in the host cities, it is consistent with prior economic research. We’ll also provide an explanation of why that is.

The benefits of mega-events: Economic reality clashes with preconception

Mega-events like the World Cup always gather lots of attention, and rightfully so. Most people get excited about their national team doing well. Host cities receive an inflow of well-off tourists flocking to the venues, spending large sums of money on accommodation, food services, and local retailers. Mayors often showcase the virtues of their own city and local amenities.

Nevertheless, economic research is clear. Mega-events rarely deliver the large windfall gains that were promised, providing little to no discernible boost to the local economy and job market. In many cases, they are even money-losing propositions, with the cities in question spending a fortune on infrastructure and amenities that are not being used subsequently — the World Cups in South Africa and Brazil are good examples of such waste. While this problem is less severe in advanced economies where the local infrastructure already exists, research finds that the multipliers from such spending are small. There is some evidence that mega-events can boost consumer sentiment, especially when the national team performs well (France in 1998 and Germany in 2006 come to mind), but typically those effects fade quickly.

Setting the scene: Hospitality employment fell

As the World Cup is held between June 11 and July 19, analysts expected that the event would boost leisure and hospitality employment. Alas, the June jobs report disappointed. Contrary to expectations, the sector recorded job losses exceeding 61,000.

If you were thinking that this might simply be a monthly data fluke in the official statistics, I’ll have to disappoint you. Private-sector sources like ADP and Revelio both confirm the weak figures. Revelio’s seasonally adjusted employment figure shows job losses in May and stagnation in June, while ADP’s private-sector payroll data shows positive but very weak job growth for those two months (keep in mind that leisure and hospitality is a very cyclical sector, so the non-seasonal data looks different).

Hiring remains weak

Moreover, worker turnover in the hospitality sector is also slightly weaker than last year. Again, this is backed up by both public and private data sources. The Bureau of Labor Statistics' (BLS) monthly hiring and quits rates run through May, while Revelio's hiring and attrition rates already have June data.

While the two series are not strictly comparable — the BLS measures are monthly while Revelio’s rates are annualized — comparing the trend is still valid. And neither of them is showing a World Cup effect: quite the opposite. According to both data sources, worker churn in hospitality is currently subdued compared with last year, with fewer employers hiring and therefore fewer workers leaving one job for another.

Why the World Cup effect is so small

There are several reasons why mega-events like the current World Cup only have a limited impact on the economy.

1. Substitution: Consumers do not have infinite pockets. When fans decide to spend more on accommodation, eating and drinking out, or fan merchandise, they will cut back on other expenditures. This is precisely why these spending booms — if they even happen — tend to be short-lived. Consumers become thriftier again once the show is over.

2. Crowding out: As much as we love the World Cup, not everybody in the community will be pleased by thousands of visiting soccer fans descending on the local pub and restaurant scene — you have my sympathies! While such mega-events attract many tourists, they might crowd out locals at the same time.

3. Extensive vs. intensive employment margin: These two terms describe job growth vs. changes in working hours. Instead of hiring additional people (extensive margin), it is more plausible that many local businesses simply adjust the shifts of their current staff to manage a spike in demand (intensive margin). The latter is often significantly cheaper than increasing headcount temporarily, which is more of a last resort.

4. The size of the economy: Most of us tend to underestimate how large the U.S. economy actually is: $32 trillion, expanding by $1.6 trillion this year (assuming 5% nominal growth). According to estimates, the event might attract some 700,000 net tourists from abroad. If the typical visitor spends some $5,000, then this only represents $3.5 billion in additional spending. While this is not a small figure, it’s not big enough to have any meaningful impact on the U.S. economy: it’s about 2 in 1,000 of this year’s GDP growth. And the same logic applies at the MSA level. New York’s and Los Angeles’ economies are about $2.4 and $1.4 trillion, respectively.

5. Monetary offset: This is simply economists’ lingo for the Federal Reserve killing the boom. If an economy-wide spending spree were to occur, policymakers would have to hike interest rates, since inflation is still above target. Growth and job creation from higher consumer spending would be offset by contraction in other sectors more sensitive to the interest-rate hikes.

What does this mean for recruiters?

The aggregate job numbers do not show any meaningful effect of the World Cup. Hospitality employment fell in June and hiring remained sluggish relative to last year. While this may be surprising, the result is in line with economic research. Big sports events tend to have little impact on economic production and job creation. For recruiters, this means less competition for talent in the sector than widely anticipated.

While the national hiring boom didn’t materialize, it is, of course, entirely possible that the World Cup’s economic effects are concentrated in the U.S. host cities. In our follow-up piece, we will therefore examine closely whether any employment effects show up at the metropolitan level in the cities where the games are played. Stay tuned!

Photo credit: Alexander Grey

Well, maybe you weren’t worried about the falling labor share. But some people are — and they probably shouldn’t be. I’ll explain why.

Wage angst

There is no doubt that the emergence of AI has created a lot of anxiety among workers. And for good reason: the technology will certainly change the labor market quite dramatically in the decade to come. While we do not believe that a doomsday scenario involving mass unemployment and collapsing economic output is realistic, AI will create winners and losers as it becomes more deeply integrated into the production process. Routine white-collar workers are at risk of displacement, while AI knowledge workers stand to gain.

Alongside fears of technological unemployment, concern about the collapsing labor share — the portion of GDP that goes to worker compensation — has been circulating. As AI displaces workers and boosts profits, wages are being squeezed, the argument goes.

While the raw data seems to support this story, it’s largely a methodological issue. Once the necessary adjustments are made, the share of economy-wide income paid out to workers has remained more stable.

Profits up, wages down?

On the surface, it certainly looks like workers are losing out. The measure of the labor share from the Bureau of Economic Analysis (BEA) shows that more than 60% of GDP accrued to workers a few decades ago. More recently, that figure has dropped below 54%. Meanwhile, corporate profits have risen to an all-time high of 14% of GDP, about 4 percentage points above their long-term average. Thus, the popular narrative is that profits are eating into wages.

However, this is a gross simplification (read on and you might catch the pun). When the necessary adjustments are made, the data shows that workers are not significantly worse off.

What are imputations and why are they part of GDP?

Gross Domestic Product (GDP) measures the total value of all goods and services produced in the economy over the course of a year.

However, each year, capital gets used up: machines wear out, software becomes obsolete, buildings deteriorate. As a result, a portion of total production must be diverted to replace worn-out capital (this is called depreciation). It should be clear that this money goes neither to capital owners as profits nor to workers in the form of wages. It simply keeps the capital stock in the economy intact.

What is interesting is that depreciation has markedly accelerated in recent decades, rising from about 12% of GDP in the 1960s to more than 16% today.

Part of the reason lies in today’s internet economy. Equipment such as computers, smartphones, and software becomes obsolete significantly faster than traditional manufacturing machinery.

Another factor we need to account for is imputed rent — the hypothetical rent a homeowner would pay to themselves.

Why do economists include this “made-up income” in GDP?

Well, think of two economies: a nation of renters — Germany — and a nation of homeowners — the United States. Now imagine that in Germany, I live in your house while you live in mine, and we each pay rent to the other. This rental income is counted as part of Germany’s GDP. But in the U.S., we live in our own houses, so no rent is actually paid. As a result, Germany’s GDP would appear artificially higher relative to the U.S., even if the underlying level of economic productivity were the same — unless we include imputed rent in the U.S. GDP figure!

Given that the housing market has become more expensive over time, imputed rent has risen from about 5% of GDP in the 1950s to more than 8% today.

Both depreciation and imputed rent have surged, but this portion of economic output is neither wage nor capital income. We therefore need to deduct them from GDP to get a more accurate picture of whether workers are truly losing out. And that’s not all: we also need to account for proprietors’ income.

What is proprietors’ income?

This is money earned by people who own and operate unincorporated businesses — sole proprietorships, partnerships, and the like. It therefore measures income of the self-employed.

In the 1950s, 40% of proprietors’ income came from agriculture, but that has fallen to under 4% in recent years. Today, we are mostly talking about gig workers (think Uber), freelancers (professionals like consultants), self-employed medical practices (dentists), and family-owned businesses.

What’s problematic about this measure is that we cannot know for sure how much of the income is derived from labor vs. capital. Think about a self-employed dentist making $300,000 a year. How much of the earnings are derived from skill, and how much comes from the equipment and facilities used in the practice? Hard to say!

Historically, economists have assumed that the wage-capital split is roughly 60-40. However, that might not be quite right anymore since self-employment has become more “labor-intensive” over time. While farms are capital-intensive (lots of machinery), a self-employed consultant may rely on little more than a laptop and a phone.

I have therefore used three assumptions for the labor share of proprietors’ income:

1. 60%

2. 75%

3. A drifting share (starting at 60% in the 1950s, and increasing by 2 percentage points each decade, slightly exceeding 75% today)

Given how the nature of self-employment has changed over time, the last scenario strikes me as the most plausible. The data shows that the labor component of self-employment has increased by more than 1 percentage point in recent decades, from about 4% in the 90s to more than 5% today.

Focus on the net labor share

Given all the considerations mentioned above, we need to focus on the net labor share — the portion of economy-wide income that goes to wages when deducting depreciation and imputed rent from GDP:

The dark blue line in the graph below shows how the net labor share has evolved over time. It is higher than in the 1950s and 1960s, and slightly lower than in the 2000s and 2010s. The 1.5 percentage point decline over the last decade is real, but significantly lower than what doomsayers would suggest!

Households are also capital owners

Another thing worth mentioning is that capital income does not just consist of corporate profits. While the gains have been unequally distributed, workers have been participating in the asset price boom of recent decades. This is true not just true housing but also for stocks. According to data from Empower — a U.S. retirement plan administrator with roughly 19 million participants — the median 401(k) for workers in their 50s is about $250,000, while the average is close to $630,000. While contributing members skew toward higher-income earners, the broader trend still holds: many workers have benefited from rising stock markets. This means the typical worker is not just a wage earner but also a capital owner. Moreover, new research shows that gains from stock-based compensation are not captured in standard labor income measures either.

Summing up

The gross labor share is an inadequate measure to assess whether workers are being squeezed. The main reason is that imputations — depreciation and imputed rent — make up a much bigger slice of GDP today than they used to.

While these “non-existent cash flows” represent real economic activity, they are not part of either labor or capital income. To get a sense of whether workers are losing out relative to capital owners, we need to add proprietors’ wage income and deduct the imputations from GDP. This measure — the net labor share — has fallen by roughly 1.5 to 3 percentage points since 2010.

So, while it is true that the share of income going to workers has declined slightly, the overall narrative has been exaggerated by a misleading interpretation of the data!

Photo credit: K. Mitch Hodge

While some people are still in denial, there is no doubt that Brexit has done significant damage to the U.K. economy. This is backed up by research from the Bank of England, OECD, academia, the financial sector, and the U.K. government. Precise estimates vary, but most studies show that Britain’s economy is about 2% to 6% smaller. The average British household is somewhere between £2,000 and £4,000 worse off because of Brexit.

But one region is bucking the trend! Northern Ireland (NI) is in a privileged position because it is the only place in the world that has dual market access. Local businesses can sell goods tariff-free to the EU and the U.K. Thanks to this unique status, NI’s economy has outperformed Great Britain in terms of GDP growth, salary gains, and job creation.

The adverse consequences of Brexit: a recap

A short summary of why Brexit was so harmful — feel free to skip this section if it’s too depressing.

One immediate effect of Brexit was a significant depreciation of the pound, causing higher inflation in the U.K., harming businesses and households alike. Brexit meant that trade with the EU became significantly more expensive and burdensome due to red tape. This is particularly problematic for small British businesses, many of which have cut back or stopped exporting to the EU altogether. And keep in mind that EU member states account for about 50% of British goods trade.

Another effect of leaving the common market is that the U.K. suddenly became a less attractive place to invest in. A standard result in economics is that market size matters. With the EU’s economy being five times larger than the U.K.’s, why would international companies invest in the smaller market only to face additional hurdles when moving products abroad? Finally, leaving the EU meant that the supply of workers from EU member states has dried up. Recruiting from Europe has become significantly more expensive and challenging due to visa restrictions. This is true for skilled workers in the white-collar space (tech, finance, professional business services), and even more so in the blue-collar space (engineering, skilled trades, construction workers). In recent years, more EU citizens have left than moved to the U.K. This reduction in the skilled workforce is problematic from a fiscal point of view. Research shows that EU workers are, on average, significant net contributors over their lifetimes.

All in all, Brexit was quite a terrible idea and none of the advertised upsides have been realized. “Singapore-on-Thames” was always a little bit of a pipe dream.

The Northern Irish exception

Northern Ireland occupies a unique post-Brexit position: while the U.K. left the EU, NI effectively remains inside the single market for goods. Thanks to the Windsor Framework, a hard border between Great Britain (GB) and Northern Ireland was avoided. To reduce friction, a “green lane” with minimal checks for items passing from GB to NI was designed for goods that stay in NI without moving into the EU. The end result is a hybrid arrangement found nowhere else: NI businesses gain dual access to both markets.

Local producers have benefited tremendously from the fact that they are the only ones that can ship tariff-free goods into the EU and U.K. alike — serving two markets of 450 and 70 million customers, respectively. This privilege has given the economy a boost. While the U.K. has grown by less than 6% in real terms since Q1 2020, NI has expanded by twice that much.

Breaking down economic activity by sector reveals some interesting facts. Unlike in Great Britain, where industrial production has stagnated, production in NI is up by about 10%. Manufacturing has done surprisingly well following Brexit, with some local businesses explicitly referencing NI’s unique position as an engine for job growth. Even more surprising, construction is up by more than 20%. Following years of inadequate housing supply, more investment has started to pour into housing and infrastructure.

What about the job market?

Thanks to its strong economic performance, Northern Ireland has by far the strongest labor market in the U.K., the only region creating jobs recently. With the severe slowdown of the economy and labor market — a result of global shocks (energy prices) and domestic policy decisions (tax and minimum wage hikes) — some 200,000 payroll jobs have been lost in the U.K. since early 2024. This is a decline of about 0.7% compared with NI’s 2.5% gain.

Since 2020, NI has added about 70,000 payroll jobs, an impressive number in a labor market of a little over 800,000 workers. Belfast alone created some 12,000 jobs — a gain of more than 9% — making it one of the fastest-growing cities in the U.K.

England’s unemployment has gradually increased from about 4% to 5% in recent years, whereas NI’s unemployment rate declined from about 3% to 1.8%. Scotland and Wales have also seen a rise, though less pronounced.

However, one reason NI’s unemployment rate is so incredibly low is elevated economic inactivity. While 20% of individuals between the ages of 16 and 64 are classified as inactive in England, the Northern Irish figure stands at about 26%. Inactivity has been a long-standing structural issue in NI, with many individuals depending on sickness or other welfare benefits. The fact that the good job market has been unable to pull in discouraged workers should be a big concern for policymakers. It proves that local barriers to entry remain a challenge for sidelined individuals such as a lack of childcare, healthcare or disability issues, limited access to jobs further away, or other factors.

Job postings and wage growth show elevated demand

Unlike the rest of the U.K., hiring demand remains elevated. Data from NIjobs, a regional job board in — you guessed correctly — Northern Ireland, shows that total job postings remain more than 30% above pre-pandemic levels. More encouraging, job postings have risen since late 2024, the opposite of what we’re seeing in the U.K.

As a result of the tighter labor market, wages in NI have risen at a significantly faster pace than in the U.K. between mid-2024 and early 2026, with growth peaking at around 8.5% last year. In recent months, though, wage pressures have converged back to the U.K. average.

What does this mean for recruiters?

Northern Ireland’s economy has boomed because local businesses have dual access to both the EU and U.K. markets. This special status has helped attract investment from abroad. Job growth remains positive and hiring demand elevated. Even global businesses are increasingly looking at Belfast as a place to invest inv, with strong economic growth in the Republic of Ireland creating additional spillover effects.

But all of this is also creating a challenge for recruiters. NI’s labor market is the hottest of all U.K. regions. And even with the unemployment rate as low as it is, pulling inactive individuals into the labor market remains a challenge. Appcast’s benchmark data shows that cost-per-application in NI is higher than elsewhere in the U.K., precisely because attracting candidates is more challenging. Do not expect this to change anytime soon as NI’s unique Brexit status is providing the region with a continued edge.

Photo credit: Donnie Rosie

After a series of several better-than-expected jobs reports over the spring months, job market growth in June hit a wall, adding a modest 57,000 jobs — concentrated in healthcare again. Downward revisions to the April and May reports subtracted 74,000 net jobs, dragging down three-month non-farm payroll growth to 111,000. That’s still a healthy figure, but a step below the recent pace of hiring.

On a positive note, the unemployment rate fell to 4.2% last month after steadily rising from 2024 to 2025. That trend has completely reversed at this point, with little sign of upward pressure on the joblessness rate.

Industry Trends

Healthcare and social assistance remained the labor market’s primary engine in June, adding 47,000 jobs, almost exactly in line with its long-run trend.

Outside of healthcare, professional and business services were the only major sources of job growth. That’s an encouraging sign for a sector that has struggled over the past few years amid higher interest rates and rapid advances in AI. Most other industries were little changed or posted modest declines.

The biggest surprise in June was the loss of 61,000 jobs in leisure and hospitality. The sector had posted solid gains in recent months, leading some analysts to attribute that strength to increased tourism surrounding the World Cup. With June’s decline, however, employment in the industry has barely increased since the start of the year.

I was skeptical of the World Cup explanation from the May jobs report. Looking at the unadjusted data, year-over-year employment growth in leisure and hospitality was largely unchanged from prior months, suggesting the tournament had little measurable impact on hiring.

Labor Force Trends

The other large negative surprise in this report was the sharp drop in the prime-age labor force participation rate, which declined by 0.6 percentage points in a single month. In fact, excluding the large drop during the peak of the pandemic, this was the single largest decline in the series during the 21^st century.

Most of the decline was concentrated among the 25–34-year-old group, so the shift may just be noise, but it is a large enough drop to warrant further inspection.

This is a clear warning sign that, despite stronger job growth in recent months, there are underlying issues with the labor force that warrant careful watching from the Fed, as their attention has fully shifted to inflation (rightfully so).

Big picture: the labor market is no longer a meaningful source of inflationary pressure. Wage growth for non-managerial workers has continued to cool, slowing to 3.4% year over year, and the latest Fed communications make clear that inflation remains the primary concern.

At the same time, policymakers shouldn’t lose sight of cracks in the labor market. Unemployment remains low at 4.2%, and payroll growth is still running above the pace needed to keep up with population growth, but hiring is still concentrated in healthcare while labor force participation has weakened. The labor market remains healthy, but it no longer looks as broad-based as it did the past several months.

What does this mean for recruiters?

For those recruiting in healthcare, the pace of hiring remains strong. The industry that surprised us most last month was hospitality: everything from restaurants, bars to hotels. The surge of international fans for the World Cup was thought to be a driver of growth in the sector, but it now appears that wasn’t the case. Construction hiring is the second-largest source of job growth in the labor market — powered by the large AI data center buildup requiring HVAC and skilled trades labor.

Last but not least: here is a quick reminder that the Recruitonomics team is hosting a Substack live event on Aug. 7 to break down the next U.S. jobs report. You can register via this link.

First things first! The Recruitonomics team is going to host a Substack live event on Aug. 7 to break down the U.S. July jobs report, released earlier that morning. Here is the link to the event. Self-recommending!

And below, you can find a roundup of the articles we published in June. Keep reading for data releases coming up this month and other interesting recruitment and labor market insights.

Upcoming Economic Data Releases and Events

• July 2: US Employment Situation Report

• July 14: US CPI

• July 16: UK GDP (monthly estimate, May 2026)

• July 17: Eurozone CPI (final June reading)

• July 21: UK Labour Market Overview

• July 22: UK CPI

• July 30: US GDP statistics (advance estimate, Q2 2026)

• July 30: Eurozone GDP (preliminary flash, Q2 2026)

In recent news:

Julius Probst, PhD

The UK: a nation in flux

The U.K. right now is very much a country in flux. There is currently no acting James Bond, Doctor Who, or prime minister for that matter. Yes, I know. I’m not the first one to make this joke.

Well, at least the political vacuum should be resolved by the end of summer. Andy Burnham — former mayor of Greater Manchester — managed to score a seat in Parliament by decisively winning a by-election in June. This positioned him to launch a leadership challenge against the battered prime minister. Starmer, in anticipation of what was coming, decided to resign on his own. He was very much a lame duck at the end, with a government in paralysis. Despite a large majority in Parliament, Starmer could not push through meaningful change like welfare reform due to opposition in his own ranks. Burnham is widely expected to win the Labour leadership contest to become the next U.K. prime minister by August.

While we do not know many of his policy ideas yet, there is one thing that is certain: Burnham is quite serious about devolution — giving the U.K.’s local authorities greater control over tax and spending decisions, with a focus on infrastructure investment. Economists generally agree that economic underperformance since the Global Financial Crisis is related to insufficient public investment, with the U.K. spending significantly less than the average OECD economy.

Another problem is that the British tax system is highly centralized. Local authorities in the U.K. collect a tiny fraction of tax revenue relative to what is standard across advanced economies. Consequently, big infrastructure projects like the Elizabeth line are typically geared toward London, while the U.K.’s other large metropolitan areas like Birmingham and Manchester are not getting a big enough slice of the pie. This is problematic for two reasons. First, the U.K. has fallen behind Germany and France largely because most cities outside the “Golden Triangle” (the London-Cambridge-Oxford arc) have extremely low levels of worker productivity. This is a major reason why living standards remain low in most other regions. Second, due to the collapse in London's housing construction, a significant share of employment growth in since 2020 has happened in lower-productivity regions, with Greater Manchester and Liverpool taking the lead. While this is obviously good news, infrastructure spending needs to follow to make these cities more productive.

If the U.K. wants to be more serious about growing the rest of the country, devolution of power might be the way to do it. Previous governments have approached the topic halfheartedly. In his speech on Monday, Burnham made it clear that he wants to go all the way. It remains to be seen, though, what policies his government will implement to achieve this goal.

Europe’s economies are increasingly suffering from climate change

While the last heat wave is barely over, Europe needs to prepare for another one coming our way in about a week’s time. June brought blistering temperatures to Europe — reaching 36°C in the U.K., 40°C in Germany, and 41°C in France (97°F, 104°F, and 106°F for our American readers). With heat records broken frequently since the beginning of this century, it is abundantly clear that climate change is playing a role. The current global temperature now exceeds its long-term average by more than 1°C.

Europe specifically is heating up faster than other regions, and the continent is not prepared. Many houses in Northern Europe do not have air conditioning (AC) because historically it simply wasn’t needed. The same is true for public facilities — schools, retirement homes, and even hospitals. Buses and trains are not running since they also have insufficient climate control and cannot cope with the heat.

The damage from climate change is increasingly weighing on economic growth and, by extension, the llabor market. Countries like France are recording excess deaths in the thousands because of the heat wave. The hot summers are also lowering agricultural production, driving up food prices. This leaves households with less spending power for other items. Think lower hiring demand in hospitality and retail.

The Rhine River — one of Europe’s largest waterways — is used for shipping, with manufacturing plants in Germany relying on it to get supplies. In recent years, frequent droughts have led to falling water levels, leaving barges able to carry only a fraction of their regular load. This supply-chain disruption is hitting Germany’s industrial sector again this year, with knock-on effects for recruitment. And economic research shows that worker productivity declines for every degree above 20°C. Working from home becomes challenging without AC. As the economic costs of adapting to climate change rise each year, Europe had better act quickly.