The labor market could become so backward that job losses will keep unemployment steady

Key Points:

• The breakeven rate of employment growth—the number of new jobs needed monthly to keep unemployment steady—has declined significantly, currently estimated at about 50,000 new jobs per month, down from over 200,000 in 2022-2023.
• Restrictive immigration policies under President Trump and an aging population reducing labor force participation are driving the breakeven rate toward zero by next year and slightly negative by 2028, suggesting payrolls could stagnate or shrink without raising unemployment.
• Despite lower job growth thresholds, layoffs are not expected to rise; sectors like healthcare may sustain modest job growth, potentially exerting gentle downward pressure on unemployment in the coming years.
• The Federal Reserve is unlikely to intervene with rate cuts solely due to anemic payroll reports unless accompanied by significant unemployment increases and broader economic weakness.
• Employers may be reluctant to reduce staff due to anticipated labor shortages, a trend reinforced by recent Supreme Court rulings limiting noncitizen worker protections, which could further shrink the documented labor force and encourage labor hoarding.