US job growth has slowed substantially this summer, with uncertain reasons behind the trend. Policymakers must weigh whether it’s due to reduced labor supply or decreased employer hiring habits. The scenario suggests an early warning sign for a potential labor market downturn.
Immigration policy is a crucial factor in determining the impact of slowing job growth. If employers are hesitant to hire, it could justify aggressive interest rate cuts. Conversely, if immigration restrictions lead to fewer workers on payrolls, it might not warrant rate cuts.
Demographic changes, such as the baby boom generation hitting retirement age, also contribute to a downward drag on job creation. However, this effect is considered mechanical and not worthy of policy attention.
The Biden administration’s experience with rising unemployment rates despite strong jobs growth highlights the challenges in interpreting labor market indicators. Austan Goolsbee, Chicago Fed president, emphasizes that aggregate numbers like total GDP growth can be misleading in understanding short-term business cycle conditions.
This year’s Jackson Hole Economic Policy Symposium will focus on “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy,” addressing the impact of immigration policy and demographic changes on labor market indicators. The uncertainty surrounding job growth raises questions about whether the central bank should cut interest rates again to shield the labor market.
The recent July jobs report strengthens the case for rate cuts in September, one year after the central bank began its rate-cutting cycle.
Source: https://www.axios.com/2025/08/19/trump-immigration-jobs-growth