U.S. Treasury Secretary Scott Bessent said on Wednesday that slowed job growth in the U.S. is not the result of a weak economy but instead tied to a drop in immigration and changes in the labor market brought on by productivity and government downsizing.
Speaking at CNBC’s Invest in America Forum on Oct. 15, Bessent backed up Federal Reserve Chair Jerome Powell’s earlier comment suggesting that Trump’s stricter immigration policies have affected the labor market.
“Have we seen two million people leave the workforce?” Bessent said, referring to a combination of deportations and reduced immigration.
“With the securing of the border and then maybe there between deportations and voluntary deportations… And I think in terms of Americans having jobs, we’re doing quite well.”
It’s Not a Demand Problem
Bessent argued that the economy is actually on the rise, pointing to a boom in capital investment and the reshoring of industries under President Trump’s administration.
He insisted that private sector investment is driving the growth, despite the current government shutdown.
He called the reduced job growth a labor supply issue, not a demand issue.
Economist Torsten Sløk of Apollo Global Management echoed that view in a recent note, identifying three key factors contributing to slower job growth: lower immigration, increased productivity due to AI, and a return to normal levels of government hiring.
“The weak labor market is not due to weaker labor demand, but rather to weaker labor supply,” Sløk wrote.
Sløk also highlighted that, based on current GDP growth, nonfarm payrolls should be around 263,000 jobs per month, but actual gains are falling short.
AI and Government Cuts Add to the Mix
Bessent emphasized that artificial intelligence is improving productivity, meaning businesses can do more with fewer workers.
“AI implementation is just really going to start biting in terms of productivity,” he said, pointing to 2026 as a year when AI’s effects will be more fully felt in the labor market.
At the same time, Bessent said the federal workforce is shrinking after growing too large in previous years.
“Federal government got very bloated and as government employment comes down, we’re going to see this CapEx boom, and on the other side private employment will pick it up.”
Government job growth was unusually high from 2022 to 2024 and is now leveling off, according to Sløk’s research.
That shift is also contributing to the perception of a slowdown in the overall labor market.
Focus Should Be on Inflation, Not Hiring Numbers
Despite concerns about slowed hiring, Bessent said he remains optimistic. He urged policymakers and the media not to misinterpret the numbers.
The job market isn’t weak because companies aren’t hiring; it’s that there are fewer available workers.
“The private sector in the U.S. has been unleashed, and the best thing the government can do is put in the guardrails but stay out of the way,” Bessent said.
Sløk agreed the Federal Reserve should shift its focus.
“The conclusion is that the Fed should focus less on the slowdown in job growth and more on the ongoing uptrend in inflation,” he wrote.
In short, the economic picture remains strong. Capital investment is surging, GDP growth is solid, and companies are still looking to hire.
But the workforce has shrunk due to a combination of Trump-era immigration restrictions, rising use of AI, and a leaner government.
Those changes, not economic weakness, are what’s slowing job growth today.