Lower Immigration Projections Mean Lower Breakeven Employment Growth Estimates

In April this year, St. Louis Fed economist Victoria Gregory and I provided an estimate for breakeven employment growth—the number of jobs the economy needs to add each month to keep the unemployment rate steady. Using Congressional Budget Office (CBO) projections from January, we estimated that the U.S. economy needed to add more than 150,000 jobs per month to maintain a stable unemployment rate.In our April blog post, we estimated breakeven employment growth to be about 153,000 jobs per month, based on CBO’s January estimates. The CBO has since revised the January estimates; using those revisions, our updated estimate is about 155,000 jobs.

Since then, new immigration projections have dramatically changed the picture. The bottom line: With much lower expected immigration for 2025, I now estimate breakeven employment growth has fallen to a range between 32,000 and 82,000 jobs per month.

Why the Big Change?

The key driver is immigration, which is a significant source of labor for the U.S. economy. As we explained in our original post, breakeven employment growth depends heavily on population growth, of which net immigration is a critical component yet the hardest to predict.

In January 2025, the CBO projected net immigration of about 168,000 people per month for 2025. But more recent projections for 2025 tell a very different story:

• American Enterprise Institute (AEI) offers two scenarios in a July report: One with negative net immigration (-44,000 per month), another with modest positive immigration (10,000 per month).
• Goldman Sachs in July projected net immigration of 41,000 per month.

These lower immigration projections translate directly into lower breakeven employment growth estimates:

For civilian, noninstitutionalized population growth net of immigration, I used the CBO’s projection of 99,000 per month, which is relatively predictable based on demographics like death rates.Others may use different assumptions for variables like population growth, and this will yield different breakeven rates. See my previous blog post with Victoria Gregory on the factors used to calculate the breakeven rate.

Recent Data Support the Lower Estimates

Labor market data from recent months seem consistent with these lower breakeven estimates. Monthly nonfarm employment growth has slowed considerably, averaging just 35,000 jobs over the past three months (May through July 2025), with particularly low readings of 19,000 in May and 14,000 in June. Meanwhile, the unemployment rate basically stayed constant over the three months and only edged up modestly from 4.0% in January to 4.2% in July.

This combination—slower job growth and a slight rise in unemployment—makes sense if the breakeven threshold has indeed fallen. The economy is still adding jobs, but fewer of them are needed to avoid a sharp increase in the unemployment rate.

The data from the last three months suggest breakeven employment growth is below 50,000. Should recent employment growth data be revised downward when the August jobs report is released on Sept. 5, it would support the low end of our estimate range (32,000 jobs) being closer to the mark.

The Takeaway for Interpreting the Jobs Report

A lower breakeven employment growth rate has important implications for how one interprets monthly jobs reports. The lower bar means that even modest job gains could be sufficient to maintain or reduce the unemployment rate, provided immigration remains at lower levels. If the economy only needs to add 50,000 jobs per month to keep unemployment stable, then monthly gains of 75,000 or 100,000 represent meaningful positive news.

As always, breakeven employment growth is a useful benchmark, not a crystal ball. In any given month, job growth may fall short of breakeven employment growth, yet the unemployment rate remains stable or even decreases. But understanding how this benchmark has shifted helps us better interpret whether monthly job gains are truly strong or weak.

Notes

1. In our April blog post, we estimated breakeven employment growth to be about 153,000 jobs per month, based on CBO’s January estimates. The CBO has since revised the January estimates; using those revisions, our updated estimate is about 155,000 jobs.
2. Others may use different assumptions for variables like population growth, and this will yield different breakeven rates. See my previous blog post with Victoria Gregory on the factors used to calculate the breakeven rate.