A struggling labor market and job insecurity go hand in hand—that is an undeniable fact. As the cost of living keeps going up without a parallel increase in wages and income, it can be very difficult for the average consumer to keep up with the market without drastically changing their spending habits.
Surprisingly, a recent report from Bank of America showed that despite the labor market supporting spending right now, cracks are emerging in the facade. If the jobs are stable and the spending is relatively balanced, then why is the workforce facing so much uncertainty? It might have something to do with the threat of layoffs and the DOGE job cuts in 2025.
The layoff trends in 2025 are a big reasons for the job insecurity that’s gripping the country (Image: Pexels)
Before the Labor Market and Job Insecurity, We Need to Understand the Economic Situation
The U.S. labor market is facing a couple of different challenges, and understanding them can help with addressing the problem better. According to the Bank of America payments data, consumers are under extreme financial pressure to pay off their biggest expenses like their housing, insurance, car payments, and utilities.
The prices of these essential items have been going up, making it harder for consumers to spend on anything else. This is truer than ever for lower-income households, as these expenses take up 95% of their after-tax income.
You also have to consider the cost of insurance payments and the fact that direct payment to providers went up 6% year-over-year (YoY), with the rates adding up to be slightly higher for middle- or higher-income customers. Motor vehicle insurance premiums went up even higher to land at 11% YoY.
With all of that in mind, consumers have managed to find ways to utilize cost-saving measures by making the most of lowered gas prices, switching to value goods and non-premium grocers, and reducing discretionary spending to try and maintain their overall spending capabilities. Although the amount of discretionary spending has been relatively stable over the last year, it is still down compared to the pre-inflation time period.
The Impact of the Labor Market
While the cost of living has gone up, the strength of the labor market has helped to stabilize some aspects of it. Analysts and economists have noted rising post-tax wages and salaries over the last year and estimated that this has helped support consumer spending. The wage growth has been a key aspect in households maintaining their spending levels, and the rate at which people are drawing down their bank deposits has slowed. This is indicative of them finding some financial stability.
Unfortunately, not all is good in the U.S. labor market, and there are a few challenges that are upsetting the balance. The wage growth that has been observed has been uneven, with lower-income households experiencing a slower rate of growth. This puts them at a disadvantage against already higher-income groups. There is also the challenge of rising unemployment.
The Layoff Trends in 2025 Spark Concerns Around Unemployment
The DOGE job cuts in 2025 have caused a spike in federal workers seeking employment opportunities on Indeed. Even if we set that issue aside, many industries are turning to layoffs as their first solution for dealing with the rising tariffs and economic challenges presented to them. Unemployment rates are still lower, but they have been trending upward.
Consumers believe that the situation will worsen over the next 12 months. The report from Bank of America pointed out that the study from the University of Michigan showed that this level of pessimism is the highest it has been in the past 10 years, even exceeding what we saw during the early days of COVID-19.
Changing economic policies and their impact on hiring is going to be critical to look into as we move further into the year. As businesses prepare for changes in their expenses and budget, they also need to consider how their employees and customers are going to change in the coming days.
What the Labor Market Concerns and Job Insecurity Trends Mean
The steady labor market is a good sign and could be good for the economy as well as the individuals who keep the economy running, however, the pessimism surrounding the situation suggests this may not last for long. The supply and demand in the job market appear to be on the cusp of changing drastically with the layoff trends we’re witnessing in 2025.
Even if workers don’t bear the brunt of layoffs, the high level of consumer pessimism about future unemployment could translate into reduced spending overall. It’s not outlandish to assume that the pessimism in the labor market and the constant job insecurity could also start to reflect in the mental health, attitude, and well-being of the workers.
HR Teams Need to Step Up To Address the Changes in the Labor Market
Those who are constantly on the edge and stressed about losing their jobs are more likely to make mistakes and burn out due to the stress. At such a time, HR strategies for keeping up with the labor market changes are essential. If organizations are considering layoffs, they need to be upfront with employees and discuss their plans, settling on a solution that does not leave employees high and dry.
Organizations that are not contemplating participating in the layoff trends in 2025 need to have open and honest discussions with their employees to reassure them. There is no point pretending that the issue of job insecurity doesn’t exist right now, as most workers across the country are at least a little worried about their roles, regardless of their industry.
As organizations figure out the ins and outs of the changing economic policies and their impact on hiring, firing, and retaining employees, they should simultaneously work on preparing their employees for what’s to come.
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