Labor force growth, breakeven employment, and potential GDP growth

Seth Murray and Ivan Vidangos
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Seth Murray: https://www.federalreserve.gov/econres/seth-m-murray.htm
Ivan Vidangos: https://www.federalreserve.gov/econres/ivan-vidangos.htm

No 2026-04-02, FEDS Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Labor force growth has been slowing and could be near-zero starting this year, driven by weak population growth reflecting low net immigration and by declining labor force participation reflecting population aging. Such weak growth in the labor force is unprecedented in the United States' recent history. In this note we highlight two significant implications of near-zero labor force growth: First, near-zero labor force growth implies that breakeven employment growth (i.e. the pace needed to maintain a steady unemployment rate) would also be near-zero—making negative job growth almost as likely as positive job growth in any given month. Second, it implies that any growth in potential GDP will need to come entirely from productivity growth. These features would represent a significant shift in U.S. labor market dynamics and the composition of economic growth.

Date: 2026-04-02
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfn:103074

DOI: 10.17016/2380-7172.4045

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