Need to Know Briefing: July 27: AI hiring tools are now a lawsuit risk.

Here's what you Need to Know this week:

The labor market sent conflicting signals this week: participation fell to its lowest level outside the pandemic in five decades, even as construction employment surged in Texas and Louisiana. AI still isn't cutting jobs at scale, but it's quickly becoming a source of litigation risk, and pay negotiation gaps and retention concerns continue to widen.

US labor force participation fell to 61.5% in June, the lowest reading since March 2021 and the weakest level in five decades outside pandemic lows.
Construction employment is diverging sharply by region, with Texas and Louisiana adding jobs while California posted the steepest losses in the country.
Nearly half of firms surveyed by the St. Louis Fed expect no staffing changes from AI in the next year, but workforce decisions are now the second most common trigger for corporate class action lawsuits.
The number of AI-touched job titles in the US has more than tripled since 2022, with most of that growth happening outside traditional tech roles.
Men are more likely than women to use outside job offers to negotiate higher pay, according to a new study of Swedish workers.

The labor market is sending conflicting signals right now.

About 1 million workers left the US labor force over the past year, including 720,000 in June alone, according to the Labor Department. That drop pulled the labor force participation rate down to 61.5% in June, the lowest reading since March 2021 and the weakest level in five decades outside pandemic lows. Participation among workers 55 and older fell to 37.1%, a 21-year low. Glassdoor Chief Economist Daniel Zhao said the accompanying dip in unemployment, from 4.3% to 4.2%, reflects fewer people looking for work rather than more hiring, calling it a labor market that's "stubbornly refusing to reaccelerate, despite recent optimism." Economists point to a mix of retirements, caregiving pressures, return-to-office mandates and discouragement among the long-term unemployed as possible drivers.

Even as the overall labor force shrinks, construction hiring tells a very different story depending on where you look. Construction employment grew in 33 states and D.C. over the past year, according to the Associated General Contractors of America, with Texas adding the most jobs of any state, 24,800, and Louisiana posting the largest percentage gain, at 7.7%. California lost the most construction jobs in the country, down 15,400, followed by Virginia, New York, Georgia and Michigan. Association officials warned that tariff uncertainty, stalled highway funding and resistance to data center development could undermine future construction demand. "Construction firms continue to add workers where demand remains strongest," said Jeffrey D. Shoaf, CEO of the Associated General Contractors of America.

AI isn't cutting jobs yet, but it's already becoming a legal liability.

A St. Louis Fed survey of Eighth District businesses found AI adoption still in its early stages, with most firms expecting no near-term staffing changes even as the technology reshapes the skills they need. Nearly half of firms, 49%, said they expect no noticeable staffing effect from AI within the next 12 months, and about 18% expect shifts in required skills rather than headcount changes. Roughly 20% expect slight staffing reductions, including a restaurant operator that said AI order-taking eliminated a drive-thru position. The most cited reason for limited AI adoption was a lack of skills, data or technical infrastructure, cited by 38% of firms, though one law firm estimated AI tools save attorneys two to three hours a week on research, deposition summaries and first drafts.

That caution hasn't stopped AI from creating a different kind of exposure: legal risk. Workforce decisions like layoffs are now the second most likely trigger for class action litigation, trailing only data breaches, according to a midyear survey of corporate counsel from Norton Rose Fulbright. Forty-seven percent of in-house counsel named workforce changes such as layoffs and policy revisions as a likely class action trigger in 2026, and 43% expect AI-related bias or discrimination claims to increase their litigation exposure through the end of the year. Among companies with more than $1 billion in revenue, the share citing AI-driven employment decisions as a litigation risk rose to 41%. "AI assisted hiring tools are creating real uncertainty for employers, particularly around bias and discrimination claims," said Kimberly Cheeseman, co-head of litigation and disputes at Norton Rose Fulbright. "The risk isn't theoretical. It's already being tested in courts and before the EEOC."

How many job titles now mention AI?

The number of job titles that mention AI has more than tripled in the US since 2022, and most of that growth is happening outside traditional tech roles, according to Indeed Hiring Lab. The US had 822 distinct AI-touched job titles in the first quarter of 2026, up from 264 in 2022, meaning about 1 in 12 job titles now touch AI in some way. In five of six countries studied, more than half of AI-touched job titles sit outside tech occupations entirely, with the US leading at 63% non-tech. Germany leads Europe with 288 AI-touched job titles, ahead of the UK, France, the Netherlands and Spain. Recent postings include an "AI Autonomous Truck Test Driver," a "Physical Therapist (AI Documentation)" and a "Real Estate Agent, AI Lead System Included."

Read more via Indeed Hiring Lab

Men negotiate with outside offers. Women mostly don't.

A study of Swedish workers found that men are far more likely than women to use outside job offers as leverage to negotiate higher pay in their current role, even when women have equivalent opportunities. Men who received outside offers of similar pay, productivity and location saw their current wages rise, while women with comparable offers did not, according to the Rockwool Foundation Berlin Institut. Women in the study changed jobs just as often as men when offers arose, leading researchers to attribute the pay gap to renegotiation tactics rather than differences in opportunity. In jobs with limited bargaining room, the pay gap tied to outside offers disappeared entirely. "Closing these gaps requires attention not only to hiring and job choice, but also to how wages are renegotiated once people are already employed," RFBerlin noted.

Read more via HR Dive

Nearly 6 in 10 workers don't see a future with their employer, and pay is part of why.

A survey of US workers found widespread uncertainty about long-term job security on both sides of the employment relationship. Fifty-nine percent of workers said they don't see a clear, long-term path with their current employer, and 63% said they don't believe their employer is committed to keeping them long-term, according to Zety. Thirty-two percent cited limited growth opportunities and 23% said they feel unfulfilled or frustrated in their current role, though the top reasons workers cited for staying anyway were financial stability, at 60%, and comfort or familiarity, at 47%.

Compensation appears to be a growing part of that dissatisfaction. Eagle Hill Consulting's quarterly Employee Retention Index fell to its lowest level in a year, driven by a 5.6-point drop in its Compensation Indicator, the sharpest decline of any measure this quarter, even as confidence in employers and workplace culture improved. "Employees generally feel good about their organizations and workplace culture, but many are questioning whether their compensation and long-term growth opportunities are keeping pace with the market," said Melissa Jezior, president and CEO of Eagle Hill Consulting. That question isn't unfounded: real advertised salaries for the top 10% of US job postings rose 6.4% to 7.5% between Q2 2025 and Q2 2026, according to Revelio Labs, while pay for bottom-decile postings fell 2.2% after adjusting for inflation.

Read more via Zety, PR Newswire, Revelio Labs

Read the full July 27th briefing.

This week's complete Need to Know Briefing — including EU immigrant employment hitting a record high, why office attendance just reached a new post-pandemic high, and a look at how back-to-school season affects working parents — is available in the full interactive edition.

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About the Need to Know Briefing

The Need to Know Briefing is published weekly by Kelly, curating the most important workforce and hiring insights for HR leaders and hiring managers.

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