Posted on www.masalamirror.com | August 2, 2025

The U.S. job market in 2025 is grappling with significant challenges, marked by slowing job growth, policy shifts, and structural changes. These developments not only affect American workers and businesses but also have far-reaching implications for India, given its deep economic ties with the U.S. through trade, outsourcing, and a large Indian diaspora. This analysis explores the key factors contributing to the U.S. job market’s struggles and their specific impact on India’s economy, workforce, and industries.

1. Slowing U.S. Job Growth and Its Effect on Indian Outsourcing

The U.S. Bureau of Labor Statistics (BLS) reported a mere 73,000 nonfarm payroll jobs added in July 2025, well below the expected 100,000. Significant downward revisions to prior months’ data—May’s job growth was cut by 125,000 to 19,000, and June’s by 133,000 to 14,000—indicate a labor market growing at just 35,000 jobs per month over the past three months, the weakest pace since the 2020 pandemic recession. Job gains are heavily concentrated in health care and social assistance (73,300 jobs in July), while sectors like technology, manufacturing, and professional services saw declines or stagnation.

Impact on India: India’s IT and Business Process Outsourcing (BPO) sectors, which rely heavily on U.S. clients, face challenges due to this slowdown. The U.S. accounts for approximately 60% of India’s IT export revenue, with companies like TCS, Infosys, and Wipro serving American firms in technology, finance, and consulting. The decline in U.S. job openings, particularly in technology (-33% compared to February 2020) and professional services, has reduced demand for outsourcing services. Indian IT firms reported a 5-7% drop in new contracts from the U.S. in Q2 2025, according to NASSCOM, as American companies scale back hiring and project budgets amid economic uncertainty. This could lead to slower revenue growth and potential layoffs in India’s IT hubs like Bengaluru, Hyderabad, and Pune.

2. U.S. Trade Policies and Tariffs: Ripple Effects on Indian Exports

The Trump administration’s aggressive trade policies, including tariffs of 10% to 41% on trading partners like Canada (35% duty), have disrupted global supply chains and increased costs for U.S. businesses. The effective tariff rate is now the highest since the 1930s, creating uncertainty that has led to a hiring freeze in industries like manufacturing and construction. This uncertainty also affects Indian exporters, as the U.S. is India’s largest trading partner, with bilateral trade reaching $120 billion in 2024.

Impact on India: India’s export sectors, including pharmaceuticals, textiles, and auto components, are vulnerable to U.S. tariff policies. While direct tariffs on Indian goods have not been as severe as those on Canada, the threat of broader trade restrictions looms large. Indian exporters face higher costs due to supply chain disruptions, particularly in manufacturing, where U.S. demand for Indian components has weakened. The Indian government estimates a potential 2-3% decline in export growth to the U.S. in 2025 if tariffs expand, impacting jobs in export-oriented industries in states like Gujarat, Tamil Nadu, and Maharashtra. Additionally, Indian firms supplying raw materials to U.S. industries face reduced orders, further straining India’s manufacturing sector.

3. Immigration Restrictions and the Indian Workforce in the U.S.

The Trump administration’s tightened immigration policies, including mass deportations and the revocation of temporary legal status for migrants, have reduced the U.S. labor supply. Foreign-born workers, including many from India, have driven three-quarters of U.S. labor force growth since February 2020, per Wells Fargo economists. Restrictions on H-1B visas, a key pathway for Indian professionals, have intensified, with fewer approvals and longer processing times reported in 2025.

Impact on India: Indian professionals, particularly in tech and engineering, face significant barriers to entering the U.S. job market. In 2024, Indians accounted for over 70% of H-1B visa recipients, with approximately 400,000 Indian workers in the U.S. The tightened visa policies have led to a 15% drop in H-1B approvals for Indian applicants in 2025, according to U.S. Citizenship and Immigration Services data. This restricts opportunities for Indian graduates and professionals, reducing remittances, which contribute around $100 billion annually to India’s economy (3% of GDP). Cities like Hyderabad and Chennai, home to many aspiring U.S.-bound professionals, may see increased unemployment among skilled workers. Additionally, returning H-1B workers could strain India’s domestic job market, where competition for high-skill roles is already intense.

4. Rising U.S. Long-Term Unemployment and Its Effect on Indian Job Seekers

Long-term unemployment in the U.S. reached 1.7 million in April 2025, with the average duration of unemployment at 24.1 weeks, the highest in over three years. The slowdown in U.S. labor market churn—hires at 3.3% and quits at 1.9% in late 2024—has created a stagnant job market, particularly for new entrants like Indian graduates seeking opportunities in the U.S.

Impact on India: Indian students and professionals targeting U.S. jobs face a tougher landscape. The decline in job openings in technology, marketing (-24%), and media (-26%) sectors, where Indian workers have historically excelled, limits opportunities. Indian students in U.S. universities, numbering over 300,000 in 2024, are finding it harder to secure Optional Practical Training (OPT) roles or full-time positions post-graduation. This could lead to a “brain drain” reversal, with skilled Indian talent returning home or seeking opportunities in countries like Canada or Australia, potentially benefiting India’s domestic workforce but also increasing competition in an already crowded job market.

5. U.S. Federal Job Cuts and Impact on Indian-American Communities

The Trump administration’s push to reduce federal spending, led by initiatives like the Department of Government Efficiency, has cut 12,000 federal jobs in July 2025, with a total decline of 84,000 since January. These cuts have impacted research, health care, and nonprofit sectors, which often employ Indian-American professionals.

Impact on India: The Indian-American community, numbering over 4.5 million, is heavily represented in federal and research roles, particularly in states like California and Texas. The 27% decline in U.S. research job postings (as of May 2025, per Indeed) affects Indian-American scientists and engineers, potentially reducing their contributions to U.S.-India collaborative projects in AI, pharmaceuticals, and renewable energy. This could also dampen diaspora-driven investments in India, as job losses reduce disposable income among Indian-Americans, who contribute significantly to India’s startup ecosystem through venture capital and remittances.

6. Structural Shifts and Opportunities for India

The U.S. labor market is undergoing structural changes, with AI and automation driving job displacement in routine roles while creating demand for skills in AI, cybersecurity, and renewable energy. The World Economic Forum predicts a net gain of 78 million global jobs by 2030, with growth in tech-driven roles. However, 39% of core job skills will change, widening the skills gap in the U.S.

Impact on India: India has an opportunity to capitalize on this shift. The country’s growing pool of AI and tech talent, with over 5 million IT professionals, positions it to meet U.S. demand for skilled workers, especially in remote or offshore roles. Indian firms are investing heavily in upskilling, with initiatives like the National AI Skilling Framework aiming to train 10 million workers by 2030. However, the U.S.’s cooling demand for tech services could slow this growth, requiring Indian companies to diversify into markets like Europe or Southeast Asia. Additionally, India’s renewable energy sector could benefit from U.S. demand for green technologies, boosting exports and jobs in states like Rajasthan and Gujarat.

7. Economic Uncertainty and India’s Macro Outlook

The U.S. Federal Reserve’s decision to maintain interest rates at 4.25%-4.50% amid tariff-induced inflation risks has created economic uncertainty. A potential rate cut in September 2025 could stimulate U.S. demand, but ongoing trade and immigration policies may keep businesses cautious, limiting hiring.

Impact on India: A weaker U.S. economy could reduce demand for Indian goods and services, impacting India’s GDP growth, projected at 6.5-7% for FY 2025-26 by the Reserve Bank of India. The Indian rupee, which depreciated by 2% against the dollar in 2025 due to U.S. trade policies, faces further pressure, increasing import costs for oil and electronics. However, a weaker rupee could make Indian exports more competitive, provided global demand stabilizes. Indian policymakers must balance these dynamics while addressing domestic inflation, which rose to 5.8% in July 2025, partly due to global supply chain disruptions.

Conclusion and Outlook for India

The U.S. job market’s challenges in 2025—slowing growth, restrictive policies, and structural shifts—pose significant risks for India’s economy. The IT and BPO sectors face reduced U.S. demand, while export industries grapple with tariff-related uncertainties. Indian professionals in the U.S. and those seeking opportunities there face visa restrictions and a competitive job market, potentially increasing domestic unemployment. However, India can leverage its skilled workforce and investments in AI and renewable energy to mitigate these challenges and explore new markets.

For Indian businesses, diversifying client bases and upskilling workers are critical to navigating the U.S. slowdown. For job seekers, focusing on in-demand skills like AI, cybersecurity, and green technologies will be key to remaining competitive. As the U.S. approaches a potential “soft landing” in 2025, India must monitor global economic trends and strengthen domestic policies to sustain growth and employment.

Sources: Bureau of Labor Statistics, NASSCOM, Reuters, U.S. Citizenship and Immigration Services, World Economic Forum, Reserve Bank of India, The Economic Times

Disclaimer: This analysis is based on data and economic trends as of August 2, 2025. Readers are encouraged to stay updated on global economic developments and consult financial experts for personalized advice.