American workers are taking home a smaller share of the country’s economic output than at any point on record, even as corporate earnings soar and U.S. GDP balloons. Data from the Bureau of Labor Statistics shows labor share—the portion of U.S. economic output that workers receive through salaries and wages—fell to 52.8% in the second quarter of 2026, its lowest level since the agency began recording the data in 1947, according to its labor productivity and costs report. Labor share stood at 53.6% in the previous quarter, and the average so far this decade is about 55.6%—putting the latest reading roughly 2.8 percentage points below even that recent norm. Employment in the U.S., meanwhile, is set to continue slowing.

The milestone comes despite skyrocketing corporate profits: Fortune 500 companies hit a record $2.1 trillion in profits in 2025, and U.S. GDP grew 3.4% in the third quarter of last year, exceeding economists’ predictions.

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

“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, growing signs indicate that as national income balloons, the U.S. workforce is deflating. Unemployment ticked up to 4.2% in September, and employers added just 584,000 jobs in 2025, compared with 2 million added in 2024. The U.S. added 29,000 jobs in September, about one-third of economists’ projections.

The bifurcation of corporate victories and weak labor data has raised concerns among economists about jobless growth—an economy expanding without jobs rising in step—jeopardizing the U.S. workforce, and about a K-shaped economy, in which 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.”

What is causing jobless growth?

Robertson attributes the weakening labor share to the rise of automation, which he noted is displacing workers while productivity—a metric that essentially measures worker output—continues to rise. Second-quarter GDP data showed nonfarm productivity grew 1.4% last quarter, though the rate has slowed from 2.2% in the same quarter a year ago.

“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, based on Department of Labor job numbers, that AI automation could displace 25% of all work hours. Over the course of the AI adoption period, they predicted, a 15% increase in AI-driven productivity would displace 6% to 7% of jobs and, at its peak, produce a 1 million increase in unemployed workers—though job displacement as a result of AI has not shown up meaningfully in any economic data. The displacement could be substantial, the analysts said, but its impacts 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, projected to boost GDP by 1.5% by 2035, according to a Wharton brief published in September 2025. Early signs indicate AI could drive productivity gains: around 80% of employees report that AI makes them faster at specific tasks, but only 37% of companies see that productivity showing up in operating profits, according to McKinsey data, and AI operating costs continue to constrain its deployment.

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,” as Morgan Stanley economists have argued, not unanimously attributed to increased adoption of AI or automation. The analysts suggested the increase would prove cyclical, or a vestige of pandemic-era habits of companies making more from less. An Oxford Economics research brief from earlier this year 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.

Why is an immigration crackdown backfiring on U.S. labor?

Mark Regets, senior fellow at the National Foundation for American Policy (NFAP), sees a different reason for the slowing workforce. He told Fortune that 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 have also created fewer opportunities for domestic-born workers to find jobs.

NFAP data shows a 1.1 million to 1.4 million-person reduction in the foreign-born workforce since January 2025, consistent with a Congressional Budget Office 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 policies.

“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.

Recent BLS data serves as counter-evidence to Miller’s argument that harsher immigration policy would grow the U.S. workforce. The labor participation rate for foreign-born workers fell from 66.3% to 66% between September 2025 and September 2026, and labor participation for native-born workers similarly fell from 61.6% to 60.9% over the same period. 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 companies to take advantage of ample labor market availability and seek out their labor instead of offshoring jobs.

How does the U.S. reverse a shrinking labor force?

While friendlier immigration policies could help reverse the 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 is already preparing to adapt to a changing labor landscape. Gen Z are flocking to trade schools in hopes of 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. A CareerTrainer survey from June found that 72% of hiring managers intended to reskill employees. 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 the 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, with greater concern about the ability of the U.S. economy to sustain growth. Upcoming BLS releases on employment and productivity will offer the next readings on whether labor’s share of national income slips further.

“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.”

A version of this story was published on Fortune.com on Jan. 13, 2026.