Is "zero employment growth equilibrium" a good thing?

At Fed Chair Jay Powell’s latest press conference he mentioned that the labor market has been pretty stangant. There’s been effectively no job creation in the private sector over the last six months or so, which he described as a “zero employment growth equilibrium.”

That balance is a tenuous one.

The labor market is in equilibrium for a couple of reasons. On one side, there’s demand for labor, which has been slowing, said Wells Fargo economist Nicole Cervi.

“You have employers that have just really had a rough year in terms of uncertainty. You have changes in trade policy, now we have the conflict in the Middle East,” she said.

And on the other side, there’s labor supply. Cervi said that’s slowing down, too, thanks in large part to the Trump Administration’s crackdown on immigration.

“What we’ve seen, with the changes in immigration policy, is net immigration to the United States was likely zero, if not negative, in 2025. And that’s really weighing on the extent to which the labor market can grow,” she said.

In other words, the supply of labor is weakening at a time when there’s also less demand for it.

So at the end of the day? “You have both lower employment and lower population, and those two will largely cancel each other out,” said Preston Mui, senior economist at Employ America.

He said that’s why the unemployment rate has been holding steady for several months, despite the fact that jobs growth has been weak.

Because if there are also fewer people in the labor market, “you might see payroll numbers falling or even hit zero, or perhaps even negative, and it could be totally fine when you’re thinking about what percentage of the population is employed,” Mui said.

That is a sign that the labor market is stable right now, said Courtney Shupert, an economist with MacroPolicy Perspectives.

“We know that there’s not a huge increase in the number of people being laid off right now. And that’s good, right? That’s healthy. That we’re not seeing unemployment spike,” she said.

But Shupert said this equilibrium we’re in can also shut people out of the labor market. For instance, she said, there are plenty of younger workers who are struggling to enter the workforce right now.

Another concern is if employers aren’t adding new jobs over the long term, economic growth can slow down.

“If fewer people are joining the labor market every month, or people aren’t able to change jobs as frequently as they’d like, or demand the wage gains that they might have been able to get in, say, 2022, that limits the consumption potential,” Shupert said.

That can also make the economy more vulnerable, he said. Especially if something else affects consumption, including a spike in energy prices.

“As we have an energy shock, households may be slightly more constrained just because they’re facing a slightly different labor market than they were a few years ago,” Shupert said.

He said this doesn’t mean the economy is headed toward a recession, but it does mean that the economy is less resilient.