The U.S. white-collar job market has experienced a dramatic slowdown in recent years, leading to a growing number of unemployed workers in tech, law, communications and media struggling to find new roles.

While the U.S. jobs market is still looking healthy overall, with the unemployment rate at 4 percent in January, reports of white-collar workers getting laid off and having a hard time finding a new job are surging, as demand appears to have softened in these industries after their explosive growth during the COVID-19 pandemic.

Why It Matters

According to S&P Global, millions of Americans are currently employed in the professional and business services sector—though their numbers have recently stalled. From April 2020 and April 2024, the number of U.S. workers employed in this sector reached 22.9 million, growing by nearly 3.9 million in four years. But after reaching nearly 23 million, that growth appeared to have largely stagnated, as the demand for jobs in the sector dwindled.

One in every four American workers who lost their jobs in 2024 worked in professional and business services, what are considered “white-collar jobs,” S&P Global found in an October report. Those roles include people working in everything from federal agencies, back-office support, financial operations and other administrative work.

What To Know

“A combination of cyclical and structural headwinds in the U.S. economy have slowed hiring for skilled knowledge, or ‘white collar,’ workers,” Aaron Terrazas, an independent economist and data scientist formerly of Glassdoor, told Newsweek.

While this trend is due in part to the very fast growth of white-collar industries during the pandemic, which now don’t need as many new hires, the main culprit appears to be the advancement of generative AI.

“On the cyclical side, high interest rates mean that companies are being more cautious about investing in new ventures or expansion plans,” Terrazas said. “On the structural side, technological advances such as LLMs [Large Language Models] and GenAI, and the post-pandemic globalization in white-collar work mean that companies can do more with their current workforces, and can rely more on knowledge workers outside the U.S.,” he added.

According to the latest official data on the job market released by the Bureau of Labor Statistics (BLS), the number of job openings dropped by 556,000 to 7.6 million on the last business day of December and was down 1.3 million for the year.

In professional and business services, the number of job openings fell by 225,000—the highest level in all sectors. Job openings in the information sector alone fell by 73,000 between December 2023 and December 2024, and hires declined by 6,000. The industries that have continued adding significant numbers of workers in the past few months include manufacturing, transportation, retail and health care—what are normally considered blue-collar jobs.

The white-collar job market, on the other hand, is shrinking. The total number of white-collar workers in the U.S. fell to 22.6 million in January from nearly 22.7 million a year earlier, according to the Federal Reserve of St. Louis. While the government has kept adding new jobs in recent months, the Trump administration’s efforts to shrink the size of the federal workforce are likely to affect white-collar workers in the sector.

Changes to the white-collar job market suggest “that the economy is fundamentally changing due to new technologies,” Julia Pollak, chief economist at ZipRecruiter, said in the S&P Global report.

This is a concern shared by many experts. A new study by the Institute for Public Policy Research (IPPR) found that 70 percent of 22,000 analyzed tasks in white-collar roles could be “transformed” or “replaced” by AI. These included “Organizational and strategic tasks” and “repetitive and non-repetitive cognitive and analytical tasks,” the most likely to be taken over by AI.

What People Are Saying

Carsten Jung, author of the IPPR report and head of AI at IPPR: “The launch of ‘AI agents’ shows AI is different from past technologies. AI technology could have a seismic impact on the economy and society: it will transform jobs, destroy old ones, create new ones, trigger the development of new products and services and allow us to do things we could not do before.”

Rakesh Kochhar, a senior researcher at Pew Research Center, told Forbes last year: “AI is distinguished from past technologies that have come over the last 100-plus years. It is reaching up from the factory floors into the office spaces where white-collar, higher-paid workers tend to be.”

What Happens Next

The answer to whether the so-called white-collar recession will continue in 2025 is very different on an industry-by-industry basis, Daniel Zhao, Glassdoor’s lead economist, told Newsweek.

“Government employment growth is likely to slow in 2025, but it’s hard to say if it will contract outright as many state and local governments continue to grow their workforces. A rebound in more cyclical industries like tech or finance is possible but is dependent on a strong economy,” he said.

“All that being said, the balance of power has absolutely shifted back toward employers compared to the ‘labor shortages’ era a few years ago,” Zhao said. “Sluggish hiring also means many employees feel stuck in their current roles without the opportunity to move up the career ladder. Additionally, for the unemployed or recently graduated, sluggish hiring is making it harder to get onto the career ladder at all.”

Faced with fewer job openings and growing competition, white-collar workers are increasingly having to consider moving to different industries to find employment or compromise on work-life balance perks like working remotely to secure a job, as employers increasingly ask staff to return to the office.

“Economy-wide layoffs are low, but they have become more prominent in sectors and for workers unaccustomed to them. Whether or not they continue, for the first time in a long time, white-collar workers are feeling the pinch of job insecurity that many blue collar-workers have felt for a long time,” Terrazas said.

“Unemployed white-collar workers are competing for increasingly scarce open roles. While many have a personal safety net in terms of savings, severance and spouses that permits them a protracted job search, others may be more willing to down-level in title, level or comp.”