Fed Chair Jerome Powell is worried about the job market. Here are 3 red flags for workers.

When Federal Reserve Chair Jerome Powell on Friday opened the door to cutting interest rates for the first time in nearly a year, he noted the tremors beginning to shake a main pillar of the U.S. economy: the labor market. 

Concerns about the pace of job growth were heightened earlier this month after government data showed a sharp slowdown in hiring in July, along with much weaker payroll gains in May and June than previously thought. The disappointing numbers were alarming enough for President Trump to question their accuracy and to fire the head of the agency tasked with compiling the data.

Yet labor experts tell CBS News they weren’t surprised by the downturn, and caution that more pain could be in store for job seekers. Data released since the August 1 job numbers shows companies are delaying hiring as they adjust course to account for headwinds including fresh U.S. tariffs and the advent of artificial intelligence, they say. 

“There’s a real cooling in the labor market,” Andy Challenger, senior vice president of executive outplacement firm Challenger, Gray & Christmas, told CBS MoneyWatch. “We’re also having lots of individual conversations with companies that are letting us know to expect future layoffs.”

He added, “So for me, there is more reason to be pessimistic about the labor market than optimistic we’ll see some major bounce back.”

Here are three charts that could point to a serious downturn in the U.S. job market.

Fewer workers are getting hired

Overall, U.S. employers in 2025 have added fewer jobs on a monthly basis compared with the pace of gains in recent years, when companies sought to expand as the economy roared back from the pandemic. In 2024, employers hired an average of 168,000 workers each month, but that has slowed to an average of 35,000 over the past three months, Powell said on Friday. 

The risk is that the labor market could weaken from here, which could lead to “sharply higher layoffs and rising unemployment,” Powell said. 

The slowdown could spur the Fed to cut its benchmark interest rate, policymakers’ main tool for energizing the economy and job growth, at its meeting next month for the first time since December 2024. Lowering rates could bolster the labor market because it would make it cheaper for consumers to borrow, driving spending, for businesses to invest, including by adding workers. 

More long-term job seekers

Another troubling sign is a recent surge in long-term job seekers, or people who have been searching for a job for more than 27 weeks. In July, about 1.8 million Americans had been looking for work for more than 27 weeks, a jump of about 64% from three years earlier and 20% from a year ago. 

It may not get easier to find work anytime soon, given signs from employers that they intend to continue to cut jobs, Challenger said.

“Don’t take the summer off” from looking for new work, he advised job-hunters. “It’s hard to imagine a scenario where the labor market will be better in three to six months.”

A jump in unemployed young workers

At the same time, young workers are also having more trouble finding their first jobs, which has been blamed on everything from slowing economic activity this year to employers adopting artificial intelligence in place of entry-level workers. 

To be sure, the nation’s unemployment rate remains low, at 4.2%. Yet that statistic is backward-looking, reflecting the labor market’s strength in previous months — it says little about economic conditions moving forward. 

Meanwhile, for new college graduates the current job market amounts to “a perfect storm,” said career coach Tracey Newell.

“Companies are limiting new entry-level roles, and AI is replacing many traditional ‘starter’ jobs,” she added, noting that it isn’t unusual for employers these days to receive hundreds of job applications for a single position.