In today’s News and Commentary, the labor market sends mixed signals as personal income declines, new research from the New York Fed links remote work to rising youth unemployment, and Virginia enacts a sweeping package of employment reforms.

The labor market continues to send mixed signals. According to the latest JOLTS data released Tuesday, job openings rose in April to their highest level in nearly two years. Yet the broader trend still points to a cooling labor market: Hiring remains near its lowest rate since April 2020, and job openings are well below their 2022 peak of 12.3 million. As Marketplace reports, that weakening demand for labor is increasingly showing up in workers’ finances. Personal income excluding government transfers—a measure economists closely monitor as a recession indicator—has been declining since September, while inflation continues to erode purchasing power and wage growth slows alongside weaker hiring. Economists warn that this combination could weigh on consumer spending and sharpen the political battle heading into midterms. Declining real incomes have historically fueled populist backlash across the political spectrum, and both parties may seek to assign blame for the squeeze on working- and middle-class households.

That weakening demand for labor may be hitting younger workers hardest. A new post on the New York Fed’s Liberty Street Economics blog finds that the rise in remote work since the pandemic has meaningfully contributed to climbing unemployment among young college graduates. Researchers estimate that remote work explains 64% of the recent increase in unemployment for young graduates, as employers shy away from hiring inexperienced workers onto remote teams where mentorship and feedback are harder to deliver. The study finds that the surge in youth unemployment is concentrated in “remotable” occupations like software engineering, while non-remotable fields like mechanical engineering saw no comparable increase. The authors also push back on the popular attribution of these trends to generative AI, noting that the uptick in youth unemployment predates the rapid diffusion of AI tools, though they acknowledge that AI may play an increasingly large role in displacing young workers going forward. 

Meanwhile, in Virginia, Governor Abigail Spanberger signed into law a broad package of employment reforms that will reshape the state’s labor landscape. The new laws include paid sick leave for all public and private employees, a payroll-funded paid family and medical leave program providing up to 12 weeks at 80% of average weekly wages, a salary history ban, pay transparency requirements for job postings, and a phased minimum wage increase to $15 per hour by January 2028. The package also prohibits noncompete agreements for healthcare professionals and expands the Virginia Human Rights Act to cover employers with as few as five employees, down from fifteen. Most provisions take effect July 1, 2026, with the paid family leave program beginning benefit payouts in December 2028. A similar paid sick leave bill passed both chambers last year with bipartisan support, only to be vetoed by then-Governor Glenn Youngkin. Notably, however, this latest legislation comes on the heels of Spanberger’s veto last month of a bill that would have expanded collective bargaining rights to roughly 500,000 public sector workers. Virginia currently allows localities to opt into public-sector bargaining under a framework established in 2021, but only a handful have done so. The vetoed bill would have made collective bargaining mandatory statewide. As we’ve previously covered, Spanberger’s veto drew sharp criticism from labor unions who had supported her gubernatorial campaign.