US Labor Force Shrinks by 1.2 Million by 2040 as Unemployment Nears 8%
Updated
Updated · Indeed Hiring Lab · May 14
US Labor Force Shrinks by 1.2 Million by 2040 as Unemployment Nears 8%
1 articles · Updated · Indeed Hiring Lab · May 14
A new Hiring Lab projection says the US labor force will be 1.2 million smaller by 2040, with unemployment rising from about 4.3% to nearly 8% as workers and jobs increasingly fail to line up.
5.9 million workers are expected to leave the labor force by 2032 before a partial recovery, driven mainly by Baby Boomer retirements and slower immigration rather than AI.
AI does little to ease the biggest shortages because its strongest effects fall in white-collar sectors such as information, finance and professional services, where labor supply is already relatively ample.
In a replacement-heavy AI scenario, employment falls by 5.6 million by 2040 and unemployment in exposed white-collar sectors jumps sharply, while construction, healthcare and government still face worker shortfalls.
The report says the main challenge is worker reallocation, not job creation, pointing to retraining, credential reform and better job matching as the key policy and employer responses.
With AI displacing office workers, can America's training systems pivot fast enough to fill millions of crucial hands-on jobs?
If retraining is the answer to the labor crisis, who will pay for millions of Americans to switch careers?
U.S. Labor Market at a Crossroads: Near-Zero Labor Force Growth, Aging Population, and the Role of Immigration and AI
Overview
The U.S. labor market in 2025-2026 remains resilient, even as the economy faces persistent inflation and interest rates are expected to stay steady. However, labor force growth has slowed sharply, nearing zero, mainly due to significant demographic changes. The U.S.-born working-age population is shrinking each year, making immigration the main source of population and workforce growth. This shift means that future economic expansion will depend more on productivity gains, as fewer new workers enter the labor force. These trends highlight the growing importance of immigration and productivity for sustaining U.S. economic growth.