Oxford Economics: U.S. Employment Breakeven Point Expected to Turn Negative
The U.S. labor market is rapidly contracting due to immigration restrictions and the accelerated retirement of baby boomers. The monthly net job growth needed to maintain a stable unemployment rate (breakeven rate) is quickly declining and may turn negative in the future, allowing for layoffs while the unemployment rate remains stable.
A report from the Dallas Fed indicates that by the summer and fall of 2025, this rate may be slightly negative; Oxford Economics estimates it is currently around 50,000 per month, a significant drop from over 200,000 during the peak immigration years of 2022-2023, and will reach zero next year, slightly negative by 2028. This forecast is based on the continuation of Trump-era immigration policies and the ongoing retirement wave from 2026 to 2029, which will continue to squeeze labor supply.
On the market side, the contraction in labor supply directly lowers the threshold for employment growth, creating an environment of "no employment expansion"; counter-cyclical industries such as healthcare still support weak positive growth, while companies tend to hoard labor in anticipation of further tightening supply; if the unemployment rate does not rise significantly, the Federal Reserve's room for a loose response to weak employment data will be limited, and capital will continue to flow towards productivity enhancement rather than large-scale hiring.
Source: Public Information
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Oxford Economics has previously tracked the impact of immigration and demographic changes on U.S. labor supply, with its model long considering the influx of foreign-born labor as a core variable; the Dallas Fed's related research has continued to quantify the labor force participation rate and retirement wave post-pandemic, noting that similar supply shocks historically pushed up the breakeven rate when baby boomers entered the labor market in the 1980s.
On the capital front, restrictive immigration policies directly reduce the supply of low-skill and some middle-skill workers, while aging accelerates labor exit, forcing companies to shift resources from headcount expansion to automation and efficiency investments; the motivation is to address wage and employment risks under supply rigidity, specifically manifested in essential industries like healthcare continuing to absorb workers, while other sectors prioritize technological substitution to maintain output.
Similar cases can be seen in Japan's lost three decades, where aging drove zero employment growth and reliance on productivity, or in some European countries where tightening immigration led to a decoupling of employment and unemployment; the current U.S. labor market is transitioning from a post-pandemic high-immigration expansion phase to a low-speed steady state under supply constraints.
Essentially, this reflects a contraction in labor supply within the restructuring of the industrial chain: when both population and policy squeeze supply, the market mechanism shifts from "growth must create jobs" to "jobs can be negative while output still increases," with pricing power tilting towards capital that controls automation and essential services.
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