U.S workers just took home their smallest share of capital since 1947, at least

Labor share, or the portion of the U.S.’s economic output that workers receive through salary and wages, decreased to 53.8% in the third quarter of 2025, its lowest level since the BLS started recording this data in 1947, according to its labor productivity and costs report published last week. In the previous quarter, labor share was at 54.6%. This decade, the labor share average was 55.6%.

That’s despite corporate earnings skyrocketing, with profits for Fortune 500 companies hitting a record $1.87 trillion in 2024. The U.S. GDP grew 4.3% in the third quarter last year, exceeding economists’ predictions. 

That growth has not only come at the expense of how much of the pie of wealth workers are taking home, but also how many Americans are in the workforce, economists warn.

“That decline in the share of labor has got to be either falling earnings or falling numbers of people,” Raymond Robertson, a labor economist at Texas A&M’s Bush School of Government, told Fortune. “The falling share of income is having to do with the shift towards capital.”

Indeed, there are growing signs that as national income balloons, the U.S. workforce is deflating. Unemployment ticked down to 4.4% in December, but still sits above the 4.1% rate from 12 months before. Moreover, employers added just 584,000 jobs in 2025 compared to 2 million added in 2024.

The stark bifurcation of corporate victories and weak labor data raises concerns among economists of jobless growth jeopardizing the U.S. workforce, as well as a K-shaped economy, where the rich get richer while the poor get poorer, becoming more exaggerated.

“Data right now is very mixed,” Robertson said. “But I think it also all consistently points to this idea that things are getting worse for workers and much better for billionaires.”

Making sense of jobless growth

Robertson attributes weakening labor share averages to the rise in automation, which he noted is displacing workers, with productivity—a metric essentially measuring worker output—continuing to rise. Third-quarter GDP data showed nonfarm productivity growth soared to an annualized rate of 4.9%.

“All these things, bit by bit, are replacing people, and they’re concentrating income and their share of capital,” he said.

Goldman Sachs analysts Joseph Briggs and Sarah Dong estimated in a report this week, based on Department of Labor job numbers, that AI automation could displace 25% of all work hours. They predicted that over the course of the AI adoption period, a 15% increase in AI-driven productivity would displace 6% to 7% of jobs, and, at its peak, a 1 million increase in unemployed workers.

The displacement is substantial, the analysts said, but said the impacts of automation will be tempered by a wealth of new jobs created as a result of the technological changes.

Automation is expected to be a boon to corporate profits and GDP, expected to boost GDP by 1.5% by 2035, according to a Wharton brief published in September 2025. Early signs indicate AI is already driving productivity gains, with companies who invested $10 million or more in AI reporting significant productivity gains compared to organizations investing less in the technology, according to EY’s U.S. AI Pulse Survey.

Robertson added that growing unemployment, which he expects to see rise over the next few months, keeps wages down, allowing margins and profits to expand.

To be sure, the recent productivity surge has been an “open question,” Morgan Stanley economists wrote in a note to clients this week, not unanimously attributed to increased adoption of AI or automation. The analysts suggested this increase would be cyclical, or vestigates of pandemic-era habits of companies making more from less.

An Oxford Economists research brief published earlier this month suggested companies are disguising overhiring-related layoffs as a result of AI, but said automation-related workforce reductions have not yet happened en masse. Additionally, while unemployment has been ticking up over the past year, it is still relatively low.

An immigration crackdown backfires on U.S. labor

Mark Regets, senior fellow at National Foundation for American Policy, sees a different reason for a slowing workforce. He told Fortune President Donald Trump’s immigration crackdown has not done what Trump administration officials, such as White House Deputy Chief of Staff Stephen Miller, said it would in increasing the number of U.S.-born workers. Instead, according to Regets, Trump’s immigration policies have not only decimated the foreign-born workforce, but has also created fewer opportunities for domestic-born workers to find jobs.

The most recent BLS household survey reveals a decline of 881,000 foreign-born workers since January 2025, and a decline of 1.3 million workers since a March 2025 peak, consistent with the Congressional Budget Office’s report last year indicating shrinking U.S. population growth as a result of migrants being deported or refusing to come to the U.S. out of fear of hostile polities.

“The data is raising huge red flags that we are losing immigrants of all types that we otherwise would be advancing America’s economy,” Regets said.

The rising U.S. unemployment rate, up from 3.7% in December 2024 is counterevidence to Miller’s argument that harsher immigration policy would grow the U.S. workforce, he added. In fact, fewer immigrant workers may actually make it harder for U.S.-born individuals to find work.

“A company unable to find the workers it needs for some roles could shut down operations rather than continuing,” Regets said.

He noted that skillset diversity in a workplace could boost productivity and justify employing more people. Greater immigration can also increase consumer spending and stimulate businesses, as well as encourage businesses to take advantage of ample labor market availability and seek out their labor instead of offshoring jobs.

Reversing a shrinking labor force

While friendlier immigration policies could help reverse an exodus of foreign-born workers, Robertson said addressing the workplace automation push would be key to growing the U.S. workforce.

“There are trades that are technology-assisted,” he said. “Those are going to be in higher demand, but you really still have to have a significant investment in skills.”

The young generation of workers are already prepared to adapt to a changing labor landscape. Gen Z are flocking to trade schools in hopes of a finding a job as a carpenter or welder not so easily outsourced by AI, and in 2024, enrollment in vocation-based community colleges increased 16%, according to data from the National Student Clearinghouse. 

Companies have taken it upon themselves to provide reskilling opportunities to employees. An Express Employment Professionals-Harris Poll survey from 2024 found that 68% of hiring managers intended to reskill employees at some point during the year, up from 60% in 2021. While the U.S. Department of Labor updated guidelines to encourage states to adapt workplace development systems, Robertson argued the government hasn’t done enough in several decades to imbue the workforce with necessary skillsets for future jobs.

“Democrats and Republicans have not significantly invested in training [or] the retraining or active labor market programs that you need to match workers to jobs,” Robertson said. “That’s the obvious solution.”

Without changes, economists see the pattern of an employment slowdown continuing, but with greater concern about the ability for the U.S. economy to sustain growth.

“We need job growth to have a growing economy, and I think we need job growth to pay our debts,” Regets said. “I don’t know how you have job growth with a shrinking labor force.”