With the labor market already on its heels in a no-fire, no-hire environment, concerns are growing that tariffs on US imports will raise operating costs and force companies to start reducing their employment rolls.
For example, respondents to the Institute for Supply Management’s November survey about factory conditions expressed high levels of concern.
A transportation equipment executive wrote, “We are initiating a more permanent change because of the tariff environment.” “This includes staff reductions, new guidance to shareholders and the development of additional offshore manufacturing that otherwise would have been for US exports.”
ISM surveys identify respondents not by name but by industry.
The survey’s employment estimate fell 2 points to 44%, its lowest reading since August and in line with a gradual but persistent trend of softening in the labor market.
There were other signs that the picture for Labor in 2026 is becoming bleaker.
Trump has worked hard to increase energy exploration and fossil fuel use. But an ISM respondent from the petroleum and coal industry pointed out, “There are no major changes at the moment, but going into 2026, we expect to see major changes with cash flow and employee numbers. The company has sold a large portion of the business generating free cash while offering voluntary severance packages to anyone.”
A manager of an electrical appliance, equipment and components business said the tariffs have made the business environment more difficult than during the Covid crisis.
“Conditions are more difficult in terms of supply chain uncertainty than they were during the coronavirus pandemic,” the defendant said.
conflicting signals
Certainly, macroeconomic conditions remain fairly stable.
Third-quarter gross domestic product is tracking at a 3.9% annual growth rate, according to the Atlanta Federal Reserve. Additionally, hiring in September was stronger than expected, with nonfarm payrolls rising by 119,000, even despite signs that major employers are cutting back. For example, Amazon announced in late October that it was cutting up to 30,000 jobs, joining other large employers in announcing cuts.
A report Tuesday from the 38-nation Organization for Economic Co-operation and Development indicated the tariffs have not yet hit the global economy, but warned that their full impact was still to come.
“The impact of higher tariff rates has yet to be fully felt on the US economy,” the Paris-based OECD report said. The report noted “a substantial decline in the value of U.S. imported goods subject to the tariffs”, which “suggests that the tariffs are impacting demand, and will continue to impact trade volumes as the announced tariffs go into full effect.”
These types of risks pose challenges for the labor market in the coming year.
An economic report from the Federal Reserve last week also said employment had declined “slightly” over the past seven weeks, while manufacturers reported that “tariffs and tariff uncertainty remain a headwind.”
The Cleveland Fed’s commentary reflected both sides of the tariff coin: “One large retailer’s average costs had increased about 20 percent year-over-year due to tariffs, and it was trying to determine how it would distribute these increases. In contrast, another large retailer did not expect further cost increases, saying that the tariff effects had stabilized.”
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