Employment – A New Normal?
This past week’s news presented some interesting facts about the state of our labor market. First, last Friday, the August jobs report was released, showing that only 22,000 new jobs were added. Economists were expecting new jobs in the range of 75,000 to 80,000. The unemployment rate ticked up to 4.3%, rising for the second month in a row. Moreover, the August jobs report revised the latest 3-month average down to 29,000 jobs per month, including an estimate that the economy lost 13,000 jobs in June. Back in early July, analysts were forecasting that around 115,000 to 140,000 new jobs were created in June. The disappointing August report makes a rate cut in next week’s Federal Reserve meeting more probable and increases the likelihood of further rate cuts in the October and December meetings.
The second, and maybe more profound, labor news from last week was the ICE raid on the Hyundai Motor Group’s massive electric vehicle complex located 25 miles west of Savannah. ICE conducted one of the largest workplace raids in the agency’s 22-year history, detaining approximately 450 workers who were mostly South Korean. The plant and construction site are on a massive 3,000-acre site, which is an important economic development project for the State of Georgia. The raid not only stopped construction work but also shut down the adjacent Hyundai factory line. This raid is part of the current aggressive illegal immigration enforcement and deportation measures. Over time, these measures might have significant implications for population growth and sustainable expansion of the economy.
Some economists believe that the US economy could be experiencing “net negative immigration” for the first time in decades. In fact, some estimate that the number of immigrant workers in the U.S. has dropped by about 1.2 million so far in 2025. Economists warn that with continued net negative immigration, U.S. population growth could dramatically slow or halt, leaving only productivity gains to drive growth in jobs and the economy. According to the American Enterprise Institute, with minimal or no immigration-driven growth, the U.S. may only need to create up to 10,000 jobs per month to keep up with population changes. This number would dramatically lower the “break-even” rate for job growth, which historically has been estimated at 70,000 to 110,000 jobs per month.
Some economists believe this could be the beginning of a major reset in the way policymakers and markets interpret employment data and economic health. Rather than thinking the recent job reports as being “bad” or evidence of a slowdown, perhaps recent low monthly new jobs are our ‘new normal.’
ICE has new appropriations funding of $170 billion over the next four years. This is one of the largest increases in law enforcement funding. While much has been said about the economic impact of tariff policy, maybe immigration policy will have a more profound impact on our long-term economic growth. Stay tuned to what Mr. Powell and Company say about this and this new normal.
Gary B. Martin