A year ago, defensive sectors drove two-thirds of US job gains. Today they drive less than a fifth.
The share of low-cyclical industries in payroll gains has fallen from 66.2% to just 19.4% over the past year, with a clear downward trend, while the share of mid to high-cyclical industries in payroll gains has risen from 33.8% to 80.6% over the same period of time, with a clear upward trend. In other words, payroll gains’ structure is shifting from low to more pro-cyclical industries, indicating a potential increase in business confidence to hire in cycle-exposed industries and business cycle expansion. While monthly shares can be noisy when total payroll gains are small, the year-over-year shift is large enough to reflect a genuine rotation rather than a statistical artifact.
The increase in payrolls in these industries is likely to be associated with AI-linked data center construction and manufacturing, which has more persistent benefits to the labour demand; however, it is important to note that once data center construction and manufacturing associated with AI is complete, there will be no reason to employ such a large pool of workforce as only a handful of workers are needed to maintain operation at data centers and similar sites.
By Amir Kh.
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