Labor force growth, breakeven employment, and potential GDP growth

… <p>The combination of historically weak population growth and declining potential LFPR would imply that the pool of available workers in the U.S. could grow by less than 10,000 workers per month in 2026. Such a slowdown in potential labor force growth is unprecedented in recent history and would have significant implications for the U.S. economy—to which we turn next.</p> <h4>Implications for breakeven employment growth</h4> <p>Breakeven employment growth is the number of jobs that must be added to the economy each month to keep the unemployment rate steady while still absorbing the growth in the potential labor force. When monthly job growth persistently exceeds the breakeven pace of employment growth, you would generally expect the unemployment rate to decline; conversely, when job growth persistently falls short of the breakeven pace you would expect the unemployment rate to rise.</p> <p>The breakeven pace of employment growth can be calculated as the change in potential employment—more concretely, the monthly change in the potential labor force times the noncyclical employment rate of individuals in the labor force (or one minus the noncyclical rate of unemployment); see Appendix C for more details. The black line in Figure 2 shows an estimate of the breakeven pace of employment growth constructed using the measure of the potential labor force discussed above and the CBO's estimate of the noncyclical rate of unemployment.</p> …