The surge in the US job market, driven by rising wages, labor shortages, and increased outsourcing to Asia, is reshaping the economy. Jobs across the United States has been on high demand the last two months which leads to rising wages across the United States. Although the economy has seen a constant ride, which is apparent from the continuity in job creations across the country, the speed of labor absorption way exceeds those of labor creation. This phenomenon has caused unemployment rate to drop—which may be a good sign for the economy as a whole, but not for companies looking to cut down on expenses.
In January of 2025 alone, job creation sums up to 143,000 jobs, while on the other hand, the number of people that are unemployed is down by 161,000 count. Looking at these numbers, the U.S economy absorbed 304,000 people into employment in January alone—a very significant number! As a result of this imbalance in the supply and demand of workers, average hourly earnings increased by 0.5% for January 2025, and 4.1% year-over-year, surpassing expectation. Among all of the sectors, business services and technology are affected the most.
Tech, Finance, and Consulting Sectors Face Fierce Talent Competition and Rising Wages
Besides demand surge as the economy recovers from the pandemic, and labor shortages, companies in the area of tech, finance and consulting are facing increased competition for great talents. As a result companies are offering better compensation packages and benefits to attract top talents. This competition for talents have also caused rising wages.
China’s AI Model Outperforms OpenAI, Highlighting Labor Cost Differences
It was just recently that there has been a shockwave through the internet in the realms of artificial intelligence, after China based research lab, Deepseek, created a better AI model than OpenAI’s ChatGPT with a fraction of the cost. DeepSeek’s R1 model operates at approximately 5% of OpenAI o1’s cost. That degree of ingenuity and efficiency is only possible because the bulk of the cost of creating an AI model is generated by manually training the model using people. While China enjoys low average hourly wage of $3.60 per hour, the U.S has to train models using workers that is paid on average $24.1 per hour.
Rising Labor Costs Spur U.S. Companies to Outsource Jobs to Asia in Search of Cost Efficiency
Learning from the case of the competition between US and China in the field of artificial intelligence, more and more U.S companies are outsourcing various business functions to Asia, making it a cost-effective strategy for many business against rising wages. In 2024 alone, 14.3 million jobs are outsourced from the US, a staggering percentage of about 10% of the U.S workforce!
