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The Recent Slowdown in Labor Supply and Demand

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Abstract

The pace of job growth cooled through mid-2025, while the unemployment rate rose relatively little. This seeming puzzle is explained by an even stepdown of labor supply and demand, meaning slowing labor force growth coincided with a slowdown in job growth. The recent decline in job growth is broad based across industries, suggesting a widespread softening of labor demand. For the labor force, recent declines are driven by changes in immigration flows and declining labor force participation. Together, these factors may signal some underlying fragility in the labor market.

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  • Leila Bengali & Ingrid Chen & Addie New-Schmidt & Nicolas Petrosky-Nadeau, 2026. "The Recent Slowdown in Labor Supply and Demand," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2026(02), pages 1-6, January.
    • Handle: RePEc:fip:fedfel:102320
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    References listed on IDEAS

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    1. Marina Azzimonti-Renzo & Zach Edwards & Sonya Ravindranath Waddell & Acacia Wyckoff, 2025. "Tariffs: Estimating the Economic Impact of the 2025 Measures and Proposals," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 25(12), April.
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