Low-hire, low-fire market still strains young workers

Key points:

• • Payrolls grew by just 57,000 in June, and the prior two months were revised down by 74,000 combined.
• • Layoffs remain historically rare, which is the only thing keeping the unemployment rate near 4.2%.
• • Recent college graduates have seen their unemployment rate climb 2.2 percentage points due to the broader slowdown.

July 2026 — The Labor Department’s June report landed with a thud: just 57,000 new jobs, roughly half of what economists had penciled in. That is the clearest evidence yet that the low-hire, low-fire labor market has settled in for the long haul. Layoffs stayed rare. Hiring did not pick up the slack.

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“Businesses are having to make hard decisions regarding hiring and what that looks like as they prepare for the future,” CareerSource Northeast Florida CEO Cheryl Taylor told Invest:.

The Conference Board’s Employment Trends Index fell for a second straight month in June, a pattern its economic research associate flagged as pointing toward slower payroll growth ahead. Consumer sentiment backs that up. Twenty-two and a half percent of consumers told the Conference Board that jobs are “hard to get” — the highest share since January 2021.

“Consumers’ pessimistic hiring outlook fueled much of June’s weakness. While unemployment claims remain near historical lows, the index interprets the increase as a negative signal for the labor market ahead,” said Jannik Schulz, economic research associate at The Conference Board.

The Bureau of Labor Statistics numbers explain why. Nonfarm payrolls rose by just 57,000 in June, and April and May were revised down by a combined 74,000 jobs — April fell to 148,000 and May to 129,000. Initial unemployment claims climbed to 222,000 in June, the largest monthly average recorded this year. Average hourly earnings rose 0.3% to $37.64, up 3.5% year over year — keeping pace exactly with the 3.5% national annual inflation rate.

Hiring expectations in the Invest: Business Sentiment Survey fell to 62% in 1Q26, their lowest level, before snapping back to 69% in 2Q26. The whiplash suggests employers themselves can’t tell which way the market is breaking.

READ MORE: Business confidence rebounds in Q2 Invest: Survey

Young workers bear it

No group is absorbing more of the adjustment than workers just entering the job market. Research from the Federal Reserve Bank of St. Louis found that in a low-hire, low-fire economy, firms hold on to existing staff — so-called worker hoarding — while cutting back on the new openings young adults rely on to gain a foothold. The employment-to-population ratio for 18- to 24-year-olds has fallen sharply since April 2023, while the same metric for prime-age workers has barely moved. New-entrant college graduates fared worse still, with their employment-to-population ratio down 3.2 percentage points nationally and 7.7 percentage points across the Eighth Federal Reserve District over the same span.

The unemployment toll breaks down unevenly by age and education. The broader slowdown alone has added 2.2 percentage points to the unemployment rate for recent college graduates, versus a 1.23-point increase for young workers with no more than a high school diploma and just 1.1 points for older workers. Researchers attribute the gap to the business cycle rather than any single cause, though they note the pullback in hiring has hit new entrants hardest since job openings, not existing headcount, are what young workers depend on.

AI adds a new drag

Artificial intelligence compounds the problem for degree-holders specifically. Researchers at the St. Louis Fed found that AI-related hiring shifts alone have added 1.68 percentage points to the unemployment rate for recent college graduates — more than five times the impact on workers aged 25 to 64, and eight times the impact on young workers with only a high school diploma. Employers are increasingly requiring entry-level hires to already have AI skills: a National Association of Colleges and Employers survey found more than a third of employers now set that bar, roughly triple the share reported the previous fall. Researchers caution that AI’s effect, while real, remains smaller than the broader decline in job openings driving the slowdown.

“AI is changing rapidly and could look different in the next five years, but we’re always looking to what’s next and innovating accordingly to prepare our students to embrace change in all forms,” Gary McGill, interim dean of the University of Florida’s Warrington College of Business told Invest:. “The University of Florida has been moving to become the AI University since 2021, and Warrington has been moving in step by hiring AI-focused faculty and incorporating AI at appropriate levels across all our programs.”

Not every corner of the labor market is frozen, however. Employers are still competing for workers who can build and manage AI systems, per ICIMS research, with job postings for programmers, developers and database administrators growing year over year even as broader tech layoffs continue.

U.S. Bank economists see a similar split emerging: firms have started hiring more temporary workers and holding hours steady, a pattern that may be shifting modestly toward a “more hire, low fire” state, though it is too early to call it sustained. Small businesses, meanwhile, are pulling back — only a net 9% of owners surveyed by the National Federation of Independent Business in May planned to add jobs over the next three months, the lowest reading since May 2020.

Want more? Read the Invest: reports.