happy Union Victory at Appomattox Day April 8, 1865.
Armageddon may (or may not) be on hold for a little while, so let’s talk about other issues, like the state of the economy — in particular, what’s going on with job growth, where important things are happening.
Are they good things or bad? Well, it’s a bad news/good news/but the good news is really bad news situation.
I’m not talking about the month-to-month numbers. You may have heard that the Bureau of Labor Statistics estimates that the U.S. economy added 178,000 jobs in March, after losing 133,000 jobs in February. Neither number tells you much except that monthly job numbers are noisy. Better to smooth them out, say by looking at the average change over the past 6 months. Here’s what that number, in thousands, looks like since the beginning of 2024:
Clearly, we’ve seen a huge employment slowdown, indeed an employment stall, with recent rates of job growth close to zero. Trump administration officials keep claiming that the economy is booming, but in terms of job creation it’s anything but.
That’s the bad news. The good news is that the employment stall has not led to a major worsening of the unemployment rate or other standard measures of the health of the labor market. Here, for example, is the percentage of prime-working-age adults with jobs, which remains high by historical standards:
But how can we have stalling job growth without rising unemployment? Clearly, the “breakeven” rate of job creation — the number of new jobs that must be added each month to keep up with growth in the labor force, and hence to avoid rising unemployment — has suddenly dropped. Multiple recent estimates suggest that breakeven employment growth is now close to zero.
There’s no mystery about why this has happened. It’s all about the crackdown on immigrants. The number of working-age native-born Americans has been falling for years, basically because we’re getting older, with most baby boomers already over 65. Labor force growth has therefore depended almost entirely on immigration — but in this ICE age, it’s dangerous to be an undocumented immigrant and, all too often, even to be a legal immigrant if your skin is the wrong color. So immigration, both legal and illegal, has dried up, and net immigration — the difference between the number of people coming and the number going — has plunged and may well have turned negative.
One way to think about what is happening is that we’ve stopped gaining jobs, but we’ve also stopped adding workers, so unemployment hasn’t risen a lot. But one can also turn this around and say that as a result of anti-immigrant policies we’ve stopped adding workers, but we have also stopped gaining jobs.
This is bad news for anyone who believed the predictions of immigration opponents. They claimed that cracking down on immigration would open up more jobs for native-born Americans, but this hasn’t happened. In fact, the unemployment rate for native-born workers has gone up under Trump, although not drastically:
There’s also another way in which the plunge in breakeven employment growth is bad news: It makes America’s already problematic fiscal outlook considerably worse, because future tax receipts depend on future economic growth — and economic growth will be much slower with zero growth in the labor force than it would have been with growing labor supply.
Consider the budget proposal the Trump administration released last week. This proposal purports to be fiscally responsible, with debt as a percentage of GDP falling slightly over the next decade. But this relatively rosy fiscal outlook depends crucially on the assumption that the economy will grow rapidly, 3 percent a year on average. This is much higher than the 2 percent growth projected by the Federal Reserve and 1.8 percent growth projected by the Congressional Budget Office. But you can see why Trump’s officials want to believe it: Rapid growth would help pay for large increases in military spending and growing outlays on Medicare and Social Security as the population ages.
Yet with no growth in the labor force, thanks to anti-immigrant policies, economic growth will have to come entirely through rising productivity — increased output per worker-hour. And 3 percent productivity growth would be very high by historical standards — in fact, we have never achieved sustained productivity growth that high, even during the postwar boom and at the height of the internet boom:
It’s possible that we’ll have a record-breaking productivity boom as a result of AI, but we shouldn’t count on it. And if AI’s economic payoff is less than miraculous, the end of net immigration will lead to a slow-growth economy.
One point in particular that’s relevant given where we are politically: Donald Trump, Pete Hegseth and others envision a world of perpetual U.S. military dominance. But how can we maintain that dominance if, as the plunge in breakeven job growth suggests, we’ve entered an era of basically zero growth in our work force?
So when it comes to jobs, the bad news is that job growth has come to a screeching halt. The good news is that this hasn’t caused surging unemployment. But the bad news within the good news is that the disconnect between job growth and unemployment reflects a collapse in the inflow of immigrants, which is really bad for economic growth and America’s position in the world.
Are we great again yet?