Powell tells students to be optimistic about the U.S. job market and AI
U.S. Federal Reserve Chairman Jerome Powell told Harvard Economics students on Monday (March 30) that he is optimistic about the medium- to long-term employment prospects for U.S. college graduates, despite the current period of very low job creation because the U.S. economy is the most dynamic and productive in the world.
U.S. employers added 115,000 jobs in April, the Bureau of Labor Statistics estimated on May 8, adding to cautious optimism about hiring, even as high oil prices from the Iran war and increased adoption of artificial intelligence pose risks to the labor market.
The April estimate was higher than forecasters expected, but lower than the department’s now revised estimate of 185,000 jobs added in March. U.S. employers cut an estimated 156,000 jobs in February, but all bimonthly reports so far this year point to stronger hiring trends in 2026 than last year, when employers added an average of only about 15,000 jobs per month. By comparison, U.S. employers added an average of more than 150,000 jobs per month in 2024.
The unemployment rate in April remained at 4.3%. Officials and analysts see the unemployment rate as steady, but say it doesn’t tell the whole story, as immigration crackdowns and retirements from an aging workforce limit the supply of job seekers.
Still, strong job growth and a steady unemployment rate could prompt the Federal Reserve, which has been concerned about a slowdown in the labor market as prices rise due to prolonged conflict in the Middle East, to focus on inflation again.
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The healthcare sector, a steady driver of job growth given the country’s aging population, added 37,000 roles in April. Employment in the transportation and warehousing industry also increased by 30,000. The retail industry saw an increase of 22,000 jobs, and the social assistance sector added 17,000 jobs.
Federal government employment has fallen again, with 9,000 jobs cut. It has fallen 11.5% since peaking in October 2024, according to the BLS. 13,000 roles were also cut in the intelligence sector.
The BLS added that employment in other industries, including construction, manufacturing, and professional and business services, was little changed in April.
Although the overall unemployment rate has stabilized, a worker’s ability to get a job remains dependent on industry, skill, and location. The Best Brokers report, which analyzed U.S. Chamber of Commerce data, found that several states, including California and Washington, have more workers than jobs available, while other parts of the country, such as North Dakota and South Dakota, are facing worker shortages.
What about the overall job market?
After a year in which job growth stalled in the face of economic uncertainty, economists deemed the job market a “low-employment” and “low-layoff” environment. Sam Taylor, a business expert at LLC.org, calls this the rise of a “frozen workforce.”
Under normal circumstances, companies grow by hiring, and employees advance through the ranks by switching roles. Right now, both sides are hesitant, Taylor said.
“Reducing job turnover means employees will stay with a company longer, even if it’s not a good fit,” Taylor said in a memo to USA TODAY. “Fewer new roles limits entry points for younger and first-time employees. Less competition among employers means less pressure to improve pay and benefits.”
Gar Doyle, regional president of recruitment firm ManpowerGroup, said employment growth in April was stronger than expected, but there were patterns in participation and hiring that showed “increasing selectivity” in the labor market.
“Employers now have more influence in the labor market and are hiring more accurately, concentrating demand in senior, professional and work-ready positions,” Doyle said in a statement to USA TODAY. “Entry-level employment has cooled and labor force participation remains subdued, which helps explain why the labor market is experiencing steady demand even as it feels less accessible.
Where is the job market headed?
After a year shaped by economic uncertainty, trade policy changes and relatively high interest rates, a little more clarity on tariffs and lower interest rates at the end of 2025 could make companies more willing to hire, said Nicole Bashaw, an economist at ZipRecruiter.
The main uncertainty now lies in the potential impact of a war with Iran, she said.
“Depending on the length and level of U.S. involvement in a conflict, the impact on specific industries can typically start to emerge later,” Bashaw said, adding that the biggest risk is that consumers cut back on spending on other goods and services to cover higher gas prices, which could lead to lower job expectations.
Private employers announced 83,387 layoffs in April, up from 60,620 in March but down from 21% from April 2025, according to a May 7 Challenger, Gray & Christmas report. In April, the company announced plans to hire 10,049 people, a 38% decrease from 16,191 in March. So far this year, recruitment plans are down 13% compared to the first four months of 2025.
What does this mean for the Fed?
Some Fed officials characterize the federal funds rate, which ranges from 3.5% to 3.75%, as nearly neutral, meaning it neither stimulates nor restricts the U.S. economy. However, the median rate-setting committee member forecast for interest rates announced on March 18 suggested a one-quarter percentage point cut by the end of the year.
Positive employment growth, stable unemployment and rising inflation could change this situation. Forecasters are starting to factor in the possibility of a rate hike this year, but they still expect no action at the next FOMC meeting in mid-June.
If the Senate approves President Donald Trump’s nominee, Kevin Warsh, he will be sworn in as speaker for the first time in June. Despite President Trump’s calls for rate cuts, Warsh won’t be the only voice on the Fed’s key interest rate. Even if he believes rate cuts are the best path forward for monetary policy, he will need to convince a majority of the rate-setting committee to vote in his favor.
(This is a developing story and will be updated to add new information.)
Contact Rachel Barber rbarber@usatoday.comFollow her on X @rachelbarber_and subscribe to her newsletter Making More of Your Money here.
