How a perfect storm of AI, shifting consumer habits, climate change, and politics could impact employment
And what you can do to help those whose financial well-being is at risk

January 9, 2025
By: Wage Protector® Team
Although the December 2024 U.S. unemployment rate was a historically robust 4.1%—and lower than anticipated—economists are split on their 2025 employment forecast. In a November survey of economists by the Federal Reserve Bank of Philadelphia, the median unemployment forecast for the coming year inched up to 4.3%. Goldman Sachs Research described the US economy as being in “a good place” and forecasted US gross domestic product (GDP) growing by 2.5%, while survey results from the Federal Reserve Bank of Philadelphia put the mean probability for real GDP growth between -3% and 6.9%
Will this sunny-ish forecast come true? That’s the big unknown. Wells Fargo put the chances of a “soft landing”—a balancing act that raises interest rates just enough to lower inflation without tipping into a recession—at 42% for 2025 and the likelihood of a recession at 28%.
Here’s a quick overview of the four areas that are likely to impact employment levels in our country in the coming year, plus something your organization can do to help protect employees and customers living in a time of economic uncertainty.
AI and automation
With the 2022 release of Open AI’s ChatGPT, people around the world discovered the power and promise of generative AI, what McKinsey & Company defines as algorithms used to create new content. On the positive side, AI is a tool that opens a world of possibility—everything from improvements in disease diagnostics and scientific research methods to better weather forecasting and optimized financial risk management. But even Open AI CEO Sam Altman admitted that while “A lot of people working on AI pretend that it’s only going to be good; it’s only going to be a supplement; no one is ever going to be replaced,” the reality is that “Jobs are definitely going to go away, full stop.”
Other experts agree. As cited by CNN, in the World Economic Forum’s (WEF) 2025 Future of Jobs Report, employers said that automation would drive a 41% downsizing of their workforce. Goldman Sachs reported that 300 million full-time jobs worldwide could change or disappear because of AI.
Previous technology-related revolutions that changed the world of work—including steam engines, the widespread availability of electricity, and computers and the internet—tended to disrupt some jobs but led to a net overall increase in employment. But industries of all kinds fear AI will simply eliminate jobs. While the WEF’s 2023 Future of Jobs Report felt technologies, including AI, would be a net positive for employment levels, the 2025 report did not.
What types of workers are most likely to be affected? According to research from the University of Pennsylvania and OpenAI, it’s educated, white-collar workers who earn up to $80,000 annually. Top contenders for job loss include customer service, manufacturing, transportation, administrative work, and financial services. Sales, legal services, hospitality, retail, insurance, entertainment, and some aspects of government bureaucracy are also susceptible. Citing a MIT and Boston University report, Forbes reported AI would drive the loss of up to two million manufacturing jobs by 2025.
Shifting consumer habits
Higher interest rates and inflation have led to a vicious cycle of reduced discretionary spending, especially among lower-income Americans, lower sales of everything from cars to restaurant meals, and increased bankruptcies and business closures. In 2024, chain stores closed at the highest levels since 2020, in the heart of the COVID-19 pandemic, and data from Coresight projected a 69% increase in store closures in 2024 vs. 2023. Some of the country’s most well-known restaurant chains—including Red Lobster and TGIFridays—have filed for bankruptcy and closed locations. And discount retailers like Big Lots and Family Dollar have struggled against the Walmart and Amazon juggernauts.
Although auto sales are expected to see small gains in 2025, S&P Global Mobility predicted lower production levels in most countries as carmakers clear their inventories. From January to November 2024, there were more than 50,000 layoffs at automobile factories around the world. And this doesn’t include job losses at automotive suppliers. If President Trump follows through on his campaign promises to impose higher tariffs on auto imports and stop subsidizing electric vehicles, the hit to auto manufacturing could be even greater.
Overall, the U.S. had 16.4 million layoffs and discharges from January 2024 to October 2024—slightly lower than 2023 levels—with professional and business services seeing the most layoffs at 1.2 million job losses.
Storms and extreme weather
Floods and droughts, storms of every flavor, and fires. If 2024 seemed like a landmark year for natural disasters, it was. According to the National Centers for Environmental Information, as of November 1, the U.S. had 24 confirmed weather/climate disaster events with losses over $1 billion. This number exceeded the annual average for 2019-2023 of 20.4 events. Hurricanes are especially costly. Experts from AccuWeather estimated that losses for the 2024 Atlantic hurricane season exceeded $500 billion worldwide. And then there are the Los Angles wildfires which continue to rage destroying homes and business as we publish this report.
Weather now has such a big impact on businesses that the U.S. Census Bureau added a new survey, the Business Trends and Outlook Survey (BTOS), in 2022, and began to ask individual businesses whether they’d had any monetary losses due to extreme weather in September 2023. The answer was “yes” for many. For instance, after Hurricane Beryl, 56.4% of Houston businesses reported monetary loss due to extreme weather—this was vs. a national average for the same period of 8.2% for the U.S. The Labor Department estimated that in October 2024, more than 512,000 people didn’t work because of bad weather (though some were still paid). This compares to an average of 69,000 people out of work because of bad weather over the prior 20 years.
Weather disasters can drive an increase in local employment levels for industries that play a vital role during the rebuilding phase, like construction and recovery. As reported in Forbes, every dollar invested in repair efforts after a hurricane generated an additional $1.72. But this initial surge might not offset job losses created by bad weather, with tourism, retail and hospitality sectors being among the hardest hit.
People with low incomes are especially vulnerable. Many don’t have a savings cushion to help them survive a period of lower or no income and it’s not uncommon for them to live in areas where disasters are more frequent and damaging. Challenges are exacerbated for those living in areas with high housing costs who tend to live far from their jobs and might struggle to get to work after a weather disaster. For instance, when a climate-related landslide closed the Teton Pass in Wyoming, the 40% of local workers who lived outside the town were forced to spend hours taking an alternate route to get to work.
Losses tend to go beyond income. According to the U.S. Department of the Treasury, extreme weather often means employees have higher expenses and lose employer-sponsored benefits like health insurance.
Political actions
Two issues could have a big impact on U.S. employment levels: tariffs and mass deportation.
Although Donald Trump claims tariffs will benefit the U.S., many economists disagree. According to research from https://www.economist.com/business/2024/12/03/how-painful-will-trumps-tariffs-be-for-american-businesses North Carolina State University reported in The Economist, during the first Trump administration, American companies affected by tariffs on Chinese imports saw a 5.4% drop in operating profits as a share of assets. A National Bureau of Economic Research study found that between 2018 and 2020, tariffs cost U.S. importers (consumers and businesses) 0.58% of gross domestic product. Forbes reported that research from the Federal Reserve Board found that any job gains by industries that competed with imports were more than offset by job losses among companies that used imported materials or were hit with retaliatory tariffs on their goods.
Next, the potential loss of immigrant labor. According to research by Brookings, there will be myriad costs if Trump follows through on his plan to deport the roughly 11 million unauthorized immigrants currently living in the U.S. One big one: a decrease in employment for U.S.-born workers. This is a result of three factors: unauthorized immigrants fill the dangerous and unattractive jobs American-born workers reject (farms and meat processing will be particularly hard hit); immigrants create demands for goods and services; and immigrants contribute to the country’s fiscal health.
Research from the American Immigration Council predicted that the loss of these immigrant workers would reduce American GDP by somewhere between 4.2% and 6.8 % and cause a substantial drop in tax revenues. In 2022, undocumented households paid $46.8 billion in federal taxes and $29.3 billion in state and local taxes. Undocumented immigrants also contributed $22.6 billion to Social Security and $5.7 billion to Medicare.
And don’t forget the cost of deportation itself. The Council estimates this at $315 billion and stresses this is likely a conservative figure. Lower revenue and higher costs may lead to budget cuts and layoffs of government employees.
Help employees and customers prepare for hard times
Uncertainty in these areas could drive up the unemployment rate and put vulnerable Americans, including your employees and customers, at financial risk. Help ensure they have the resources to protect themselves and their families should their paychecks take a hit by giving them access to wage protection insurance.
The best coverage options will include disability caused by injury or illness, involuntary unemployment, and salary gap coverage—a benefit that can be difficult to find. Look for policies with the following features:
- Allow people to work multiple jobs to hit minimum hours-worked requirements. With 8.7 million Americans working at least two jobs to keep the lights on, it’s important to look for policies that allow this flexibility.
- Have benefit amount and period options. Seek out policy options that let insured employees/customers tailor a plan to meet their needs.
- Are not a lending insurance product. Employees/customers don’t need a loan with your institution to qualify for coverage.
- Feature guaranteed issue. Look for policies with no individual underwriting.
- Permit spouses and significant others to purchase. Most households have multiple breadwinners. Make policies available that allow protection for all.
- Let benefits be used for any purchase. The best policies don’t limit how benefits are used.
Wage Protector offers all this and more. To learn about coverage options, visit salarygappartners.com or email bill.jolicoeur@salarygappartners.com.
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