A top Trump administration economic advisor has a theory on the labor market freeze.
Kevin Hassett, director of the National Economic Council, told CNBC’s “Squawk Box” on Monday that AI may be pushing worker productivity so high that employers are stepping on the brakes on hiring.
“There could be a little bit of, almost, quiet time in the labor market,” Hassett told show host Joe Kernen, “Because firms are finding that AI is making their workers so productive that they don’t necessarily have to hire the new kids out of college and so on.”
Hasset, however, maintains the position that AI will eventually create more jobs in the long run.
“Because there’s so much output growth and income growth, that’s the kind of thing that a free market will work out relatively quickly as, you know, new ways to spend money emerge,” Hassett said.
A study by a team of researchers at Stanford University found that AI is already replacing entry-level coders, causing a nearly 20% decline in employment of 22- to 25-year-old developers by July 2025 in comparison to the hiring peak in late 2022.
The Trump administration has aggressively promoted AI development. Trump has signed several executive orders aimed at easing regulations and expanding AI infrastructure, including initiatives to promote data center growth, such as the $500 billion Stargate Project.
The latest available data from the Bureau of Labour Statistics shows that in August, employers added just 22,000 nonfarm jobs, which fell well below Wall Street’s expectation of 80,000. The unemployment rate also ticked up to 4.3% in August, its highest level since October 2021, when the economy was still recovering from the pandemic.
No new jobs data have been released since the government shutdown, but in October alone, Amazon announced plans to eliminate about 14,000 corporate roles, while Target said it would cut 1,000 white-collar jobs to remove what it described as “overlapping work.”
The White House did not immediately respond to a request for comment.