The Recent Slowdown in Labor Supply and Demand

Leila Bengali, Ingrid Chen, Addie New-Schmidt and Nicolas Petrosky-Nadeau
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Ingrid Chen: https://www.linkedin.com/in/ingrid-chen-84730a1b0/

FRBSF Economic Letter, 2026, vol. 2026, issue 02, 6

Abstract: The pace of job growth cooled through mid-2025, while the unemployment rate rose relatively little. This seeming puzzle is explained by an even stepdown of labor supply and demand, meaning slowing labor force growth coincided with a slowdown in job growth. The recent decline in job growth is broad based across industries, suggesting a widespread softening of labor demand. For the labor force, recent declines are driven by changes in immigration flows and declining labor force participation. Together, these factors may signal some underlying fragility in the labor market.

Date: 2026
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