What low breakeven employment growth means for the US labour market

The US labour market is experiencing a significant slowdown, with the breakeven pace of monthly employment growth forecasted to decline from 50,000 today to zero next year, and potentially turn slightly negative by 2028. This trend suggests that the recent increases in nonfarm payrolls may not accurately reflect the market’s strength.

Current modelling indicates that the Federal Reserve is unlikely to alter its assessment of the labour market based solely on changes in nonfarm payrolls, given the uncertainty surrounding breakeven estimates. A notable rise in unemployment or other indicators of weakness would be necessary for the Fed to reconsider its approach to interest rates.

The report highlights the importance of benchmarking monthly job changes against the breakeven rate to gain a clearer understanding of the labour market dynamics. It also notes that restrictive immigration policies and demographic shifts are contributing to a lower breakeven rate, which has implications for future employment growth.

Download the report for more detailed insights.