Demographics and Immigration Lowered the Bar for Job Growth

The subtle shift in job numbers, driven by demographic and immigration forces, reveals a hidden economic reality: the declining need for job growth to maintain stable employment. This conversation, featuring insights from labor market analyst Guy Berger and the personal story of Alessandro Negrete, exposes the non-obvious consequence of an aging population and reduced immigration, which lowers the "break-even jobs number." Those who grasp this dynamic gain an advantage in understanding labor market health beyond headline figures, predicting economic trends, and recognizing the significant, often overlooked, impact of immigration policy on the workforce. This is essential reading for economists, policymakers, business leaders, and anyone seeking a nuanced understanding of the modern labor market.

The Shrinking Bar for a "Good" Jobs Number

The monthly jobs report, a cornerstone of economic news, often elicits strong reactions. Yet, as this conversation reveals, the very definition of a "good" jobs number has fundamentally changed. What once required 100,000 to 200,000 new jobs a month to keep unemployment stable, now might necessitate only tens of thousands. This isn't because the economy has suddenly become hyper-efficient; rather, it's a consequence of a shrinking labor force. Guy Berger, a senior fellow at the Burning Glass Institute, explains that the unemployment rate is a fraction: the number of unemployed people divided by the total labor force. When the denominator--the labor force--grows less rapidly, or even shrinks, fewer new jobs are needed to keep the unemployment rate from ticking upward.

This demographic shift is not a distant concern but a present reality for the US, mirroring trends seen in rapidly aging populations elsewhere. Fewer people are entering the country, and some are leaving, leading to a potential peak in the working-age population. This slowdown in labor force growth means that even modest job gains, or even losses, can result in a stable unemployment rate. The implications are profound: headline job numbers that once signaled robust economic health can now mask underlying shifts, leading to a misinterpretation of the labor market's true state.

"A good jobs number is not what it used to be. The standard has fallen a lot."

-- Guy Berger

This recalibration of expectations around job growth is critical. Conventional wisdom, focused on consistently high job creation, fails to account for the changing demographics. The "break-even jobs number"--the monthly job creation needed to prevent unemployment from rising--has decreased significantly. This creates a situation where seemingly weak job reports might not indicate an economic downturn, but rather a new equilibrium. For those who understand this, it provides a crucial advantage in analyzing economic data, allowing them to look beyond the immediate figures to the underlying demographic and immigration-driven forces shaping the labor market.

Alessandro's Story: The Human Cost of Immigration Policy

The abstract economic concept of a shrinking labor force gains a poignant human dimension through the story of Alessandro Negrete. Alessandro's life, shaped by his undocumented status, illustrates the direct impact of immigration policy on individual lives and, by extension, on the broader economy. His journey from growing up in Los Angeles, unaware of the limitations his status imposed, to facing the reality of higher education barriers due to lack of a social security number, highlights the systemic challenges faced by undocumented individuals.

"My status hadn't really come up. It wasn't something that we openly talked about, but it wasn't also something that I openly noticed and made a difference."

-- Alessandro Negrete

The narrative traces Alessandro's path through community college and a career in social justice, demonstrating his capability and hustle despite not attending UC Berkeley as initially planned. However, the increasing immigration crackdowns, particularly during the Trump administration, created an environment of fear and uncertainty. His decision to remain in the US was initially tied to caring for his mother, who was also undocumented and battling cancer. When his mother's health improved and she received residency, and with a second Trump administration ushering in even stronger anti-immigration measures, Alessandro made the difficult decision to leave the US.

Alessandro's departure is not just a personal story; it represents a significant loss of skilled labor for the US economy. His education, experience, and potential for innovation are now contributing to another country's economy. This highlights a critical downstream consequence of restrictive immigration policies: the emigration of valuable human capital. The conversation posits that a larger, more diverse population can foster innovation through the sharing of ideas. Alessandro's story serves as a powerful counterpoint to simplistic economic models, demonstrating that the "adjustment costs" of population growth--such as infrastructure needs--must be weighed against the loss of talent and dynamism when people leave. His story underscores that immigration policy has direct, tangible effects on the labor market, influencing not just the unemployment rate but also the availability of skilled workers and the overall innovative capacity of the economy.

The Unseen Impact of Shifting Demographics on Labor Dynamics

The interplay between demographic shifts and immigration policy creates a complex feedback loop that subtly reshapes the labor market. The declining birth rates and aging populations, coupled with reduced immigration, mean the US labor force is no longer expanding at a pace that demands high job creation to maintain stability. This creates a situation where the "break-even jobs number" acts as a deceptive metric if not understood within its demographic context.

The story of Alessandro Negrete exemplifies a critical, often overlooked, consequence of this dynamic: the loss of skilled individuals. His decision to leave the US, driven by immigration policies and a desire for a less stressful environment, represents a brain drain that impacts the economy. The education and experience he accumulated over four decades are now a resource for another nation. This outflow of talent, combined with fewer new entrants to the workforce, can lead to a scarcity of skilled labor in certain sectors, even when headline unemployment figures appear stable.

The conversation implicitly suggests that a focus on immediate job numbers, without considering the underlying demographic and immigration trends, leads to a flawed understanding of economic health. The system, influenced by these macro forces, is adapting in ways that are not immediately apparent. For instance, the reduced influx of new workers might, over time, increase competition for existing talent, potentially driving up wages for certain roles. Conversely, it could also lead to a stagnation of innovation if the pool of new ideas and perspectives shrinks.

"The unemployment rate has two parts. It has the numerator, the number of people out of work and looking for a job. And it has the denominator, what you divide that unemployment number by. You divide it by the total number of people in America in the labor force."

-- Guy Berger

The implication is that conventional economic strategies, which rely on robust job growth as a primary indicator of success, may become less effective. Instead, a more nuanced approach is required, one that acknowledges the long-term impact of demographic trends and immigration policies on labor supply, skill availability, and economic dynamism. Those who can anticipate these shifts--understanding that a shrinking labor force changes the rules of the game--will be better positioned to navigate the evolving economic landscape and identify opportunities that others might miss. The delayed payoff for understanding these deeper systemic forces lies in more accurate forecasting and strategic planning in a labor market that is fundamentally different from the one of previous decades.

• Immediate Action: Re-evaluate current hiring metrics to account for the lower "break-even jobs number." Focus on the quality and skill set of hires rather than solely on the quantity.
• Longer-Term Investment: Advocate for and support immigration policies that attract and retain skilled workers, recognizing their contribution to innovation and economic growth.
• Immediate Action: Analyze workforce demographics to predict future labor shortages or surpluses, particularly in sectors reliant on younger or immigrant populations.
• Immediate Action: Foster an inclusive workplace culture that retains diverse talent, mitigating the risk of losing skilled individuals due to policy or environment.
• Longer-Term Investment: Invest in reskilling and upskilling programs for the existing workforce to adapt to potential labor supply constraints.
• This pays off in 12-18 months: Develop strategic partnerships with educational institutions to build a pipeline of talent, especially in fields impacted by demographic shifts.
• Requires patience most people lack: Begin scenario planning for a future with a potentially stagnant or declining labor force, focusing on productivity gains and automation where appropriate.