Hiring Lab predicts that by 2040, there could be 1.2 million fewer workers in the workforce and as many as 5.6 million fewer jobs. The unemployment rate could rise to almost 8%. The prediction is based on U.S. labor force statistics from the Bureau of Labor Statistics’ Job Openings and Labor Force Turnover Survey (JOLTS). In 2025, there were approximately 159.1 million workers in the U.S. labor force across the 10 employment supersectors tracked by JOLTS. By 2040, the size of this labor force is projected to shrink by roughly 0.7% from 2025 levels, a net decline of about 1.2 million workers.
What’s driving this? According to Hiring Lab, two major factors: immigration and retirements. It is projected that at current immigration levels, the U.S. labor force will shrink by roughly 1.2 million workers by 2040. More bad news, it is expected that the near-term decline will be more acute: a drop of about 3.7%, or 5.9 million workers, by 2032. This sharp drop will be driven in large part by aging and retiring workers, not AI-driven change.
The impact of AI and the future of work is likely to be less about widespread job loss and more about a growing mismatch between the jobs people want and are qualified to perform and the jobs the economy actually needs. Over the next 15 years, this skills gap is expected to expand gradually but significantly. Consider the rapid growth of data centers across the country. There is already a shortage of construction workers, electricians, and HVAC technicians needed to build, operate, and maintain these facilities. Many of these roles command six-figure salaries, and even as workforce supply increases over time, compensation levels are unlikely to decline due to the ongoing demand for these specialized skills.
As immigration slows, fewer workers will enter the labor force, further tightening the talent market. This workforce decline is likely to put upward pressure on wages as competition for skilled employees increases. However, if healthcare costs continue to rise at double-digit rates, employers may accelerate investments in technology and automation to help manage labor expenses, which often account for 30% or more of total operating costs.
At the same time, demographic and economic pressures could encourage more older workers to remain in or return to the workforce, often in part-time or flexible roles. This trend may become more pronounced if projected reductions in Social Security benefits, estimated at approximately 20% in the absence of congressional action, become a reality.
A handful of sectors such as education, health, manufacturing, and government employ a large share of older workers. Retirement rates already (or soon will) exceed 3%, well above the rate at which new workers will flow in to replace them. There are several factors contributing to these potential labor shortages, ranging from historically low wages in certain occupations to the specialized education, training, and credentials required for others. More importantly, employment across the 10 JOLTS supersectors is expected to decline by 8.8 million by 2032, or 5.8%, from 151 million in 2025 to approximately 142.2 million, with natural declines being about 65% with AI replacement taking up the remaining declines by 2040.
A major issue is the mismatch of higher education to the jobs available today and in the future. Take for example liberal arts majors, it does provide a well-rounded student, but what hard skills does it provide other than a thinking approach to problems and the need for graduate school? And in the meantime, Waymo or other driverless cars or delivery services may take jobs they could be doing while preparing for additional school. As a result, at least 13% of the younger generations are approaching work in a layered approach; stacking jobs to ensure multiple income flows to offset any job loss. The trust in employers is sorely lacking.
For talent management professionals, they should develop programs that allow for phased retirement and part-time roles, as well as opportunities that can provide more flexibility in the workforce for the sandwiched workers. There is nothing wrong with a part-time manager. It’s a fallacy to think otherwise. Moreover, AI will not be able to make up for knowledge fund loss that every organization will likely experience.
Talent management professionals need to develop hard skill training along with AI, internal certification programs, and soft skill training to build and retain a relevant workforce. Most importantly, employers need to allocate the training dollars and time for the employee to take this training. Talent management professionals should work on C-Suite to eschew the notion that a larger part-time workforce is bad and conversely full-time is good, while developing benefit packages that could create a long-standing productive workforce that can easily adapt to new economic conditions.
Source: Hiring Lab 5/14/26