• by Corinne Casagrande , Yesterday

Unemployment is one of the most important variables in our marketing mix and econometric models. Consumer confidence has been all over the place, but people don’t stop spending when their confidence drops. They stop spending when their paychecks disappear, or when they worry that might happen.

Labor force dropout is a leading indicator of weakness

In ROI benchmarks, the unemployment claims are a top external shock variable affecting baseline sales. Unemployment remains low at 4.2%, and wage growth is 3.9% year over year. But those headline numbers don’t tell the whole story. In May alone, 625,000 people left the labor force, pushing the participation rate down to 62.4% and the employment-to-population ratio to a three-year low. Meanwhile, prior job gains were revised downward by 95,000 positions, and job growth remains concentrated in only a few sectors.

The nuance behind the steady unemployment number would not show up in your monthly marketing mix modeling (MMM) readout. When fewer people are collecting paychecks overall, marketers will eventually see the impact in sales data.

AI-driven cost-cutting is reducing white-collar income

In May, Microsoft eliminated roughly 6,000 jobs, citing the need to “reduce layers of management.”  Big tech companies have layoffs all the time. But these were software engineers, technical program leads, and product managers, the very roles increasingly touched by AI. IBM similarly replaced hundreds of HR positions with AI, reportedly cutting HR spending by 40%.

These decisions are often framed as operational efficiency. But from a planning perspective, they represent a reduction in the income and economic confidence for workers in professional, affluent segments that marketers rely on.

The entry-level stall has long-term implications

At the other end of the labor market, new graduates are entering one of the most difficult job environments in recent history, with an unemployment rate of 5.8%, the highest in 40 years. Entry-level hiring has fallen to recession-era levels, particularly in professional and business services.

The entry-level freeze delays major life milestones and introduces early financial fragility in high-potential cohorts.

Labor cuts lag policy changes

While May’s labor data suggests early signs of softening, business sentiment points to deeper trouble ahead. Regional Federal Reserve surveys show that 20%–40% of businesses across multiple regions anticipate reducing headcount due to tariffs or government policy uncertainty.

Since a broader set of tariffs took effect in April, the downstream impact on employment may not show up until late summer or early fall, which is exactly when marketers are executing Q3 campaigns and finalizing holiday investments.

Three Planning Takeaways for Q3

Reforecast high-ticket discretionary categories downward where employment exposure is high. Labor force dropout and AI-related layoffs are shrinking spend-ready segments faster than topline unemployment suggests.

Track employment fields for affluent targeting strategies. Efficiency gains in tech and professional services are translating to lower job counts among high-income, high-spending consumers.

Build Q3–Q4 contingency plans around tariff-driven job risk. Begin scenario planning now for spend contraction, especially in trade-exposed categories like auto, luxury, and consumer electronics.