The job market isn’t going to catch up with the rest of the US economy anytime soon.
That’s according to top economist Mohamed El-Erian, who thinks there’s an “unusual” pattern that’s unfolding in the labor market. In an op-ed for the Financial Times over the weekend, the former PIMCO CEO pointed to how job additions in the US have lagged economic growth over the past year — a divergence that’s only been seen a few other times in history, and typically during recessions.
After accounting for revisions, 2025 represented one of the weakest years for hiring outside of recessions for the last two decades, El-Erian said. The number of nonfarm jobs rose an average 0.47% in 2025, the weakest average annual growth rate outside of a recession since 2003, according to Bureau of Labor Statistics data.
Yet, the US economy as a whole continues to show strength. GDP rose at a 4.3% yearly pace in the third quarter, and is expected to increase 3.7% year-over-year in the fourth quarter, according to the latest estimate from Atlanta Fed economists.
El-Erian pointed to past instances of similar divergence across history: the 90s, the early 2000s, and the years that followed the onset of the Great Financial Crisis. Although he noted that, in those instances, the economy was in the early stages of recovering after a recession — earlier in the cycle than we are rightn ow.
“This trend is likely to prove more unsettling than prior episodes of ‘jobless growth,'” El-Erian wrote, pointing to several reasons he believed the divergence in jobs and economic growth would continue:
- Companies are preparing for widespread use of AI in the workplace. Some firms are already changing their workflows to integrate the technology, a trend El-Erian referred to as “AI front-running.”
- Firms are starting to realize they overhired during the pandemic, when the demand for labor was strong. Many companies have shifted and are “no longer hoarding” workers, El-Erian said.
- Uncertainty surrounding the economic outlook and some policies from the Trump administration could also be causing hirers to hold back.
“This time around, it may well last longer because we are just at the start of the AI adoption process, with robotics just around the corner and quantum computing further behind,” he added of the trend.
This period of economic decoupling could also bring on more pain, El-Erian suggested, pointing to existing concerns about affordability and wealth inequality in the US.
“Indeed, part of the challenge for 2026 is managing a lot better the economic, political and social risks of an economy that, without corporate and policy adjustments, may no longer need as many workers to grow,” he added.
More forecasters have been eyeing the potential for a weaker labor market in 2026, particularly as AI starts to disrupt the business world.
Last year, JPMorgan economists said they linked the rising jobless rate among recent college graduates to the growing excitement for AI, and flagged the risks for a “jobless recovery” in the US economy.
Goldman Sachs also said it saw the potential for a period of “jobless growth” in the US, and previously estimated that AI could impact around 300 million full-time jobs around the world.