America’s gig economy
Self-employment, at both the high and the low end, is keeping consumption afloat — but for how long?
Rana Foroohar
© Matt KenyonDo Americans start businesses and otherwise strike out on our own — as consultants, day-traders or workers for hire — in higher numbers than in many other countries because we are brave enough to risk it all for more freedom?
Or is it because we live in a country where gig work is slowly taking over the labour market?
It’s a question that’s particularly relevant to the strange signals coming from recent employment numbers.
While payroll growth, which reflects formal employment, has been weak for the past few months, unemployment claims have been flat.
That’s different than in 2023, when payroll growth was also decelerating, but unemployment claims were up.
Meanwhile, the number of new business applications, which has turned up sharply since the pandemic, recently reached an all-time high.
These statistics reflect not only the creation of traditional standalone businesses — whether that means a new software company or a hair salon — but also high-end self-employment.
Consultants, marketing professionals, writers and other sorts of white-collar workers might file such an application.
What does it all mean?
One interpretation: the American labour market is slowly but surely turning towards more freelance and contract work, at both the upper and lower ends of the socio-economic spectrum.
While that implies flexibility and entrepreneurialism, it also may mean an economy in which labour markets — and growth — will be more volatile and precarious than in the past.
We know that lower-end gig work has been booming for years now (a Federal Reserve report looking at 2024 data found 22 per cent of US adults engaged in gig activities like driving, delivery and odd jobs).
But the number of wealthy freelancers is surging as well.
One 2025 survey found 5.6mn Americans were earning a six-figure living with gig work.
Technology has been the big enabler of it.
As TS Lombard managing director Steve Blitz pointed out in a recent note to clients, there is an interesting chiming between the sectors where new businesses are being created — such as retail, professional, scientific and technical services — and those areas where companies are laying white-collar workers off.
As he writes, “social media lowers the barrier for selling, making the rise in retailing easy to explain.
Professional services, essentially a shift from employee to consultant, also has a low barrier to entry with virtual meetings, etc.”
While gig work such as driving an Uber doesn’t require you to make a business application, higher-end professional work does — which would seem to be what’s driving those flat unemployment claims, even amid a tough labour market.
As Blitz put it to me, “the gig economy isn’t just about ride sharing — you might be a TikTok influencer, or an author or a consultant”.
Whatever the case, he notes, if you are making more in the freelance economy than you would be in unemployment insurance (which is pretty easy in the US) then your changed circumstances aren’t showing up in the labour market data very clearly.
A larger K-shaped gig economy — along with asset growth among the rich — goes a long way towards explaining why consumer spending is a lot more robust than many analysts expected it to be at this point in the economic cycle, given dismal payrolls and the economic turmoil caused by President Donald Trump.
And yet it also explains the sense of fear and anxiety that many workers feel.
In a country with almost no social safety net, freelance labourers must cover all their own pension and healthcare costs and have no paid time off or other corporate extras.
This sense of pessimism is especially prevalent among younger, college-educated workers who aren’t seeing the economic upside of their costly college degrees (only 28 per cent say it’s a good time to find a job, according to new Gallup data).
In his upcoming book Mutiny: The Rise and Revolt of the College-Educated Working Class, Noam Scheiber looks at how four-year college graduates who would once have stepped into decently paid jobs in their field of interest are still — six years after Covid — settling for contract retail jobs and part-time restaurant gigs.
The unemployment rate for new college graduates remains stubbornly high.
This gets to another big takeaway from the rise of contract work: the political rise of young, college-educated populists.
The people that elected New York mayor Zohran Mamdani to office were young, middle-class, college-educated workers for whom the American dream — if you define it as the ability to have a home, children and retirement — is now out of reach.
This is particularly true for college-educated people of colour.
For non-white people born in the 1980s, the lifetime value of a college degree is “statistically indistinguishable from zero”, according to St Louis Fed research.
This brings me to a final thought about labour markets.
Consumption is roughly 70 per cent of the US economy.
Sustaining that requires not only income, but also security.
Employment is now more precarious at both ends of the K-shaped economy.
Artificial intelligence will exacerbate the trend.
Policymakers and market participants might consider how quickly growth could shift if the precariat decides to stop spending.
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