The Irony of a Jobs Pickup That Lands Right Where It Started
And what tariffs and immigration have to do with it.
There’s been a pickup in the labor market in the six months of employment data we’ve gotten since November 2025. The unemployment rate has ticked down slightly, by around 0.2%, and has since held steady. More interesting, job gains have increased and broadened, though only to a point.
(We’re going to stick with private job growth because DOGE's deferred resignation program packed a lot of federal job losses into October.) Since November, when the unemployment rate peaked, private job growth has been 68.3 thousand a month, compared to 23.1 thousand a month during the first 10 months of the Trump administration. (Though it remains lower than the 85.1 thousand private sector jobs a month in 2024.)
There’s a really funny irony in these new numbers, which the Trump administration is promoting as a win. When they took office, the Trump team said the economy was in a secret recession because so much of the economy was dependent on health care jobs. Stephen Miran of the CEA and Secretary Bessent argued at the beginning of 2025 that “73% of all jobs created [at the end of the Biden administration] were due to government and government-adjacent sectors [...] like education, sectors like health care [and] the short-term pain is coming from the reorientation of the economy, from the government to the private sector.”
Read that italicized quote again. 73% is too much of the job growth to come from government-adjacent sectors like private education and health services, and we'll have to take some pain to change the economy and bring that share down. Got it.
They did administer that short-term pain, and, during the first 10 months of their administration, at 58.8 thousand jobs a month out of 23.1 thousand in monthly overall private job growth, private education and health services were responsible for a comical 255% (!) of all job growth. But here we are past that and, after blowing up global trade, destroying historical alliances, raising tariffs to century-high levels, waging a terror campaign against non-citizens, shredding the federal administrative state, and attempting to imprison members of the central bank, they’ve done their “reorientation.”
And, as you can see in the figure above, at 50.2 out of 68.3 thousand jobs averaged over the past six months, private education and health services are responsible for … 73% of job growth. They warned about 73% of job growth coming from government and government-adjacent sectors, and here’s one of the sectors they flagged, doing exactly that on its own. They did all of this to end up in the exact same place, the exact same percentage point they started at, except inflation is now hotter. Ah! Well. Nevertheless.
So what’s driving this less-bad labor market over the past six months? Maybe it has something to do with tariffs.
Again, looking at the chart above, much of this turnaround is that blue-collar jobs aren’t bleeding out anymore. We’re losing fewer manufacturing jobs. Construction turned positive and so did employment services, which is likely a proxy for manufacturing employment via temporary workers (Bowdle and Tito, Federal Reserve, 2024). Together that shifts about 50,000 private sector jobs.
Maybe the worst of the tariff uncertainty is over? That doesn’t seem right; the courts made the endgame much more complicated during this time. Oral arguments for the case that blocked the initial tariffs were from November, with the consensus being that it went poorly for the Trump team. So maybe industry believed the worst was behind them?
But maybe it’s something to do with immigration?
Construction was a big turnaround, and construction tends to have a lot of foreign-born and non-citizen workers. Let’s go back one extra month, so data through March, so we can get more granular job categories. We take the 250 sub-industries that cover most of all private employment (the sub-industries that feed into the diffusion index), and break them into quantiles of their share of non-citizen employment in 2024. (See this post for the methodology.) So Q5 is the ~20% of sub-industries with the most non-citizens.
So for the highest quantile of non-citizen share, the first 10 months of 2025 saw a major drop, going from 29 thousand a month in 2024 to -19.8 thousand a month through October. But since November it’s at 33.3 thousand a month, a major rebound. A similar trend happened with the 4th quantile.
Are native-born workers taking these jobs? Probably not. Below is the prime-age (25-54) employment-to-population ratio by month (as it is not seasonally adjusted), and it’s obviously lower during this time than in prior years. We see the same thing if we use the native-born unemployment rate. I don’t think that’s the channel.
So what’s going on? Whatever it is, the labor market picture looks better, and the inflation rate worse, than in November of last year, when there was a case for potential rate cuts. That case is no more.