How much job growth is actually needed as population growth slows dramatically?
By Wolf Richter for WOLF STREET.
The federal government shed another 34,000 jobs in January as previously departed employees whose separation packages expired at yearend came off the payrolls.
Since the beginning of 2025, the federal government has shed 323,000 employees, or 10.7% of its staff, according to the Bureau of Labor Statistics today (I discussed today’s big annual benchmark revisions of nonfarm payrolls separately here).
Companies that lost government contracts, or whose contracts were reduced or paused, also laid off people. But those were private-sector jobs; they’re not included here; they’re included in private-sector employment below.
State governments shed another 18,000 employees in January. Since the beginning of 2025, they have shed 62,000 workers. Local governments added 10,000 jobs in January and 157,000 since the beginning of 2025.
Employment at all levels of government sank by 42,000 in January and by 166,000 since the beginning of 2025, having flipped from being a big job creator in the prior two years.
But the private sector added 172,000 jobs in January, the most in over a year (blue columns in the chart).
The three-month average, which irons out the month-to-month squiggles, hit a low point in August at zero jobs added, and has zigzagged higher since then, to 103,000 jobs by January (red line).
Since the beginning of 2025, it added 539,000 jobs. Since the beginning of 2024, it added 1.56 million jobs, with six of those months showing job declines, much weaker than previously reported, according to today’s revised figures.
But private sector job growth has ramped up in recent months.
The Fed should keep its eyes on private-sector jobs for its monetary policy decisions. While the drop in government employment impacts the unemployment rate, consumer spending, and the economy, it is the result of a political decision by the White House, and not the result of weak demand, slow consumer spending, or other economic weakness that might be considered a reason for rate cuts.
Total nonfarm payrolls, including governments, rose by 130,000 in January. For the past three months combined, total nonfarm payrolls rose by 219,000 jobs, for a three-month average job growth of 73,000 (red line in the chart below).
Year-over-year, total nonfarm employment rose by only 359,000.
Average hourly earnings rose by 0.41% in January from December (+5.0% annualized), after barely edging up in the prior month. The three-month average, which is more useful, rose by 3.5% annualized.
Year-over-year, average hourly earnings rose by 3.7% in January.
How much job growth is needed as population growth slows?
The crackdown on illegal immigration has dramatically slowed overall population growth. The Census Bureau estimates that, with current trends, Net International Migration (immigration minus emigration) could turn “negative” in two years, with more people leaving than coming.
Net International Migration in the 12 months to July 1, 2025, plunged by over half to 1.26 million people, but that period was a mix of six months of Biden’s immigration policies and six months of Trump’s immigration policies.
For the 12-month period through July 2026, the total population would increase by only 756,600, of which 518,000 from natural growth (births minus deaths) and the rest from Net International Immigration, according to projections by the Census Bureau, indicated in light blue in the chart below (my discussion: Population Growth Slows to Crawl, Net Migration May Turn “Negative”).
How much job growth is required to maintain or even tighten full employment under these conditions? Only part of the population growth of 756,000 would be in the labor force.
So maybe, as has been suggested, a growth rate in nonfarm payrolls of 50,000 jobs per month would maintain or tighten the currently already low unemployment levels.
The unemployment rate dropped to 4.28% in January, the second month of declines, the lowest since July, and at the low end of the historical range.
The unemployment rate reflects the number of unemployed people who are actively looking for a job divided by the labor force (people who are working or are looking for a job):
- The number of unemployed fell by 141,000, second month of declines, to 7.36 million, the lowest since July.
- The labor force jumped by 387,000 people: on a big gain in total jobs, including farm work and self-employment, and the drop in the number of unemployed.
The prime-age labor force participation rate (25-to-54-year-olds) rose to a multi-decade high of 84.1%.
The prime-age labor force participation rate eliminates the issue of the retiring boomers. The overall labor force participation rate shows the percentage of the population that either has a job or is looking for a job. When people retire and stop looking for a job, they exit the labor force but remain in the population until they die. The surge of boomer retirements, which started about 15 years ago, has pushed down the overall labor force participation rate, as these retired boomers are still in the population but no longer in the labor force.
The prime-age labor force participation rate is a cleaner depiction of participation in the labor market, than the overall participation rate, and speaks of a lot of strength in the labor market that has been changing dramatically since early 2025 due to the crackdown on illegal immigration, which has slowed the growth of supply of labor.
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According to AI, this hasn’t happened in at least 50 years. Economic implications guesses on housing stock availability/prices, wages for manual labor, traffic, health care availability, school enrollments, social spending, etc.?
“The Census Bureau estimates that, with current trends, Net International Migration (immigration minus emigration) could turn “negative” in two years, with more people leaving than coming.”
I’m not sure they want to leave. Just fyi
so it’s more of an “engineered by self” problem.
I’m pretty sure 65% of the population of the us is indifferent to removing huge swaths of the us population.
It seems counter productive.
Especially if we need to rebuild us manufacturing to counter china, we’re gonna need low priced workers to run the factories.
I literally just had this conversation with my coworker today.
He has refused to work for his neighbor for some drywall repair, several times. (Citing ideological differences).
After my coworker asked why he didn’t hire “an American” the reply was that it was “too expensive.”
Ehh… “services inflation continues to rage as wage growth continues to outpace…” Or whatever (not that Wolf needs headline suggestions).
Sure looks like an acceleration of growth is happening.
Powell won’t cut, so assuming the economy is clearly humming by June when Warsh takes over, that’ll be an interesting time at the Mariner Eccles building .
Mr. Wolf writes: “The Fed should keep its eyes on private-sector jobs for its monetary policy decisions.” Jerome Powell had spoken endlessly of Labor/Job imbalance as the driver of inflation. Inflation has increased again and this private sector job increase is the evidence behind that inflation. All in all, this continuing teasing of the labor/job imbalance, through job creating stimulus of apparent easy monetary conditions, is just more year after year tiring news of a Federal Reserve policy that is maintaining inflation, either by design or incompetence.
Wolf!! You provided Excellent data points. My only concern is AI on high tech jobs. I feel for the 20 year old pursuing CS degree. CS is the best occupation remuneration wise. I retired as a Software Engineer. It gave me great lifestyle. I advise every youngster to pursue coding. Now I don’t know what to advise.
Yes, they have a problem.
I would advise basic human connection, but maybe they will automate that too.
Anesthesiology is where it’s at.
Meh. Puts me to sleep.
I respectfully suggest one of the hard sciences – physics for example. This teaches the currently understood model of our universe, how it behaves, and thus allows us to manipulate matter and energy flows to achieve specific outcomes. It’s a broad church permitting many onward options.
Whilst there may not be many pure physics job options open presently, it demonstrates the student’s ability to deal in broad, abstract and complex concepts; to stay the course on tough, mentally grueling subjects; and to render more rigorous assessments on some of the more wilder ideas for future ‘tech’.
Other suggestions, electrician or plumber. Skilled services sector workers are ageing out and there’s a dearth of new entrants. They were all sold a ‘bill of goods’ that getting any degree is the gateway to +$100k jobs.
My advice to my 19yr son is: continue with a business and accounting degree at the local community college; continue to engage in your current occupation that you enjoy; and figure out how to make a living from it. He declined my advice to become a semiconductor engineer like his dad. You just can’t tell your kids anything – they are determined to do it their way!
All prior responses are fair. Anything that has actual human interaction involved.
Medical fields will see increasing demand. Aesthetician (cosmetics, not anesthesia, see above), entertainer, any trades including and especially related to tech.
The manager of the property I work at is excited to implement a software tracking system for maintenance schedules and work. I hear a tech-age manager blushing over an app that will just list all the work that needs to be done.
I am pretty sure the app will not be changing any lightbulbs, patching or painting any walls or completing any remodel work.
The manager does not pay enough people the sufficient wage to do the work. I don’t believe the app will resolve this issue.
On a Reddit Claude forum an advanced senior coder just hired a junior coder.
The junior coder can only use AI to do his job.
This alarmed the senior coder.
“How much job growth is needed as population growth slows?”
As a non-capitalist (in a hyper capitalistic environment) I have often questioned how much (continuous and accelerating) growth is needed (period).
The best answers usually lean toward the globally competitive economy/ political system and/ or the insatiable appetite of the “haves” and “have mores.” I can see that growth is beneficial, and I also suspect that the ways it has been brought about in recent years (decades) are not as healthy or widely beneficial as a more “organic” approach.
“The prime-age labor force participation rate (25-to-54-year-olds) rose to a multi-decade high of 84.1%.”
Must be fake news! Remember? NOBODY wants to WORK anymore!?! OR, are more people required to work, even without the blessings of family formation etc.?
Interesting data on prime age participation rate. I’d love to see data on how many jobs need to be replaced each month from death, retirement, layoffs, terminations and how that plays into the nonfarm payrolls. What’s the big deal about exclusion of farm payrolls?