The current macroeconomy has been described by some as a “no hire–no fire” economy. Gross domestic product (GDP), a measure of the market value of goods and services produced, has been strong, with third-quarter estimates now at 4.4%. In the most recent quarter, growth was driven primarily by a combination of the resilient consumer, and a reversal of the import surge observed during the first quarter of the year.
Despite the strong growth, comparable gains have not followed in the labor market. Payroll growth has slowed significantly from last year, and hiring activity has declined. Layoffs, however, have not surged. In fact, layoffs remain at historically low levels and well below arecession threshold of roughly 350,000 initial claims per week. Employers, it seems, are holding onto workers, but are increasingly reluctant to add new ones.
Closer to home, we are observing similar patterns across the State of Indiana. The latest state GDP report shows robust 5.1% growth in the third quarter, the strongest quarterly growth since late 2023. Yet job gains for both 2024 and 2025 are running at the slowest pace of the past decade, excluding the sharp losses associated with the COVID recession. Year over year, Indiana payroll employment is ahead by roughly 19,000 jobs, below both pre-pandemic and post-pandemic averages of approximately 27,000 and 38,000 jobs, respectively.
Interestingly, 2019 produced the third-weakest year for job growth over the past decade, with payrolls rising by only about 20,000 jobs. That year followed the implementation of tariffs in 2018, including those on steel and aluminum, an important point of reference for today.
Nearly all the jobs added over the past year in Indiana came from healthcare, which accounted for roughly 17,000 of the 19,000 net jobs gained. Other notable gains came from professional and business services, which added about 9,000 jobs, and construction, which contributed another 3,000.
Indiana remains a national hub for both manufacturing and logistics. Both sectors are particularly sensitive to trade policy, and both struggled in 2025. Transportation and warehousing shed approximately 4,000 jobs over the year, while manufacturing employment was essentially flat. For manufacturing, however, 2025 represented something of a stabilization year following losses of roughly 14,000 and 10,000 jobs in the prior two years.
Turning to Louisville Metro, the latest data show that payroll growth has modestly accelerated in the second half of the year. While the most recent figures show a net gain of about 2,000 jobs over the year, average monthly gains in the second half exceeded those seen earlier in the year. Unlike Indiana, healthcare is no longer the dominant job-creation sector in Louisville Metro, adding fewer than 1,000 jobs in 2025. Last year, Louisville healthcare drove a significant component of overall job growth.
Like Indiana, Louisville is both a manufacturing region and a logistics hub, and both sectors experienced job losses over the past year. Manufacturing employment declined only slightly, but transportation and warehousing shed approximately 2,000 jobs. Construction, by contrast, added more than 2,000 jobs.
Taken together, 2025 stands out as one of the slowest years for job growth for both Indiana and Louisville Metro. Higher interest rates initially weighed on manufacturing activity beginning in 2022. More recently, however, the impact of tariffs appears to be a growing headwind for both the Indiana economy and the Louisville Metro area. Tariff-sensitive sectors such as manufacturing and transportation and warehousing have borne the brunt of these effects. With GDP growth running strong and consumer spending remaining resilient, tariffs increasingly stand out as a key factor holding back job growth.
