The labor market may be poised for dislocation with President-elect Donald Trump set to take office for the second time later this month.

For the past two years, health care has dominated all other industries in terms of growth, aided partly by Covid-related spending. The health care and social assistance sectors added 902,000 jobs in 2024, according to Friday’s employment report from the Bureau of Labor Statistics, almost as many as the 966,000 jobs they created in 2023.

The government sector came in a distant second, creating some 440,000 jobs in 2024, down from 709,000 in 2023.

Part of the growth in health care jobs is also tied to rising population and a burgeoning number of retirees, said Elise Gould, senior economist at the Economic Policy Institute.

“Healthcare and social insurance has been rising gangbusters for years now,” Gould told CNBC in a Friday interview. “Some of that is an aging population, some of it is just population growth.”

Looming change

But that could change in a second Trump administration, especially if it brings mass deportations and a renewed debate over foreign labor visas. Immigrants accounted for nearly 18% of health care workers in 2021, according to the Migration Policy Institute.

“There’s already such high demand there and if we have mass deportations, that’s certainly going to come at a cost for the services that can be provided in those sectors,” Gould said. “You could then have shortages that could lead to more inflation because you’re going to have employers trying to beat out each other to try to get the fewer workers that there might be, and that could cause problems in the macroeconomy.”

The government sector has been the second-fastest growing sector the past two years. Much of that growth has happened at the state level, Gould said. The state-level government workforce grew at a faster pace than local last year, while the federal government employee base rose at roughly the national rate.

But, as with health care, the government sector could see workforce reductions under President-elect Trump’s new Department of Government Efficiency, a strictly advisory body headed by Elon Musk and Vivek Ramaswamy that aims to slash government spending.

“If you get rid of that kind of a policy at the federal level, you’re going to lose lots of highly productive workers, and so that could be a detriment to the services that they provide and obviously to the overall economy,” Gould said. “Unemployment can go up … So many things can happen if you damage that vital federal workforce, and if there’s less funding at the same local level that can be problematic as well.”

Manufacturing growth — maybe

Conversely, a Trump administration may prove positive for sectors such as manufacturing and mining and logging, the two groups that saw the weakest job creation in 2024. Trump’s proposed tariffs could boost growth in these industries, but Gould said it’s impossible to predict by how much.

With concerns around sticky inflation looming into the new year, Gould said that the focus on the labor economy moving forward should be the share of corporate sector income that goes to workers versus profits, which she said is still “very, very low.”

“When workers have money in their pockets and they spend it on goods and services, that drives the production of goods and the provision of services,” she said. “Even though we’ve seen productivity growth and we’ve had inflation come down, there is just a lot more room for wages to rise without putting upward pressure on inflation.”