The labor market could become so backward that the economy will have to shed jobs to keep unemployment steady

President Donald Trump’s immigration crackdown and the surge in baby boomer retirements could soon redefine what it means to have a healthy labor market.

Americans have long been conditioned to expect that robust gains in the Labor Department’s monthly payroll report will result in lower unemployment. When hiring is weak or negative, the labor market can’t absorb enough new workers, sending the jobless rate up.

For years, monthly job gains of around 125,000 to 150,000 were considered necessary to offset entrants into the workforce. But when the labor pool is shrinking, the math looks different.

In fact, a report from Dallas Fed economists earlier this year found that the breakeven rate of employment growth, or the number of net new jobs needed each month to keep the unemployment rate steady, actually went slightly negative during the summer and fall of 2025.

That means payrolls can be stagnant or shrink, and the unemployment rate will hold steady instead climb. Such...