While the latest data on job creation in the US may not be as weak as it appears at first sight (see here for a full explanation) it is clear from our graph of the week that the number of new jobs being created by the US economy has fallen over the course of 2025. To put it simply, the US labour market is in a ‘low-hire, low-fire’ equilibrium.
Employers may be wary of hiring new workers because of uncertainty over the outlook. At the same time, they may be cautious about laying workers off on account of a shrinking labour pool.
Back in September, the US Department of Homeland Security announced that 2 million undocumented immigrants had left the US. Of these, around 1.6 million left through ‘self-deportation’, and ICE (Immigration and Customs Enforcement) deported 400 000. If these numbers accurately reflect events, the US population will have declined over the last year – an extremely unusual development.
If indeed the population and labour force has shrunk, then even a relatively low rate of job creation could push wage growth higher and add to inflationary pressure.
It remains to be seen how effective the Trump administration’s efforts to reduce immigrant labour have been, but there are good grounds for thinking the supply of labour has fallen. That could cause even a relatively modest rise in job creation – for example, due to the fiscal stimulus in 2026 from the One Big Beautiful Bill – to be inflationary.
