Usually, when the economy grows, so does employment in the kinds of office jobs that form the backbone of modern corporate life. It hasn't been true lately, and that may solve a key mystery of the 2020s' economy.
The big picture: While overall employment trends have been steady, companies have successfully squeezed more out of a falling number of workers in the sectors that are the major sources of white-collar office jobs.
- These sectors — finance, insurance, information, and professional and business services — normally add jobs steadily outside of recessions. In the last three years, they have cut jobs on net, despite solid GDP growth.
- That started long before AI advances threatened more widespread job losses. That means there is a risk of an even gloomier future for people whose job is to look at a screen all day and move around words, numbers and lines of computer code.
- American workers are pessimistic about the job market, despite a low unemployment rate and rapid GDP growth. The decline in core white-collar sectors means it might not be much of a mystery at all.
Zoom out: Gad Levanon, chief economist of the Burning Glass Institute, calls these sectors the white-collar core of the economy. They account for more than 40% of U.S. GDP and 20% of U.S. employment.
- What is striking is that over the last three years, these sectors have continued growing in GDP terms, even as their employment has shrunk.
- They have thus become more productive and, Levanon argues, have become the major driver of an economy-wide productivity surge.
By the numbers: Total employment in these sectors peaked in November 2022 and is down 1.9% since then. Private sector employment outside those industries is up 4.1% in the same span.
- For context, from 2010 to 2019, these sectors added an average of 569,000 jobs a year. In the last three years, they've lost an average of 191,000 jobs a year.
What they're saying: "These industries form the white-collar core of the modern economy," Levanon wrote recently, encompassing banks, insurers, software, media, consulting, accounting, legal services and many corporate back-office functions.
- "They are also unusually exposed to process standardization and technology-driven efficiency gains, including workflow redesign and, increasingly, AI-enabled automation."
The intrigue: One potential factor in the job losses is that companies are course-correcting after excessively expanding payrolls during the COVID-19 pandemic and its aftermath.
- But the fact that the headcount reduction has been underway for more than three years suggests there's more to it than that.
- If the pandemic had never happened and the 2010-2019 hiring patterns had continued through today, these sectors would employ 2.3 million more workers than they actually do — implying there is some bigger structural break in demand for white-collar workers.
Between the lines: What seems to be happening is a multistep process by which core business functions require fewer workers.
- Step 1: In 2023, companies realized they hired more people than they needed during the super-hot job market of 2021 and 2022, and cut back.
- Step 2: They streamlined and automated work processes in 2023 and 2024 to deal with leaner staffing, and found that those steps allowed them to continue trimming labor costs.
- Step 3: In 2025 and now 2026, they either already see AI advances that allow them to push those savings further, or anticipate them arriving imminently.
The bottom line: "These are the office jobs that hire a lot of professionals with a college degree," Levanon tells Axios. "They're also the ones that show up at the top of the exposure measures to AI."
