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By Hugh Cameron
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A projected decline in the size of the American workforce is set to alter employment conditions and warp the U.S. labor market landscape for years to come.
A “tsunami” of retiring baby boomers and a sharp drop in net immigration thanks to the policies of the Trump administration, experts say, will significantly lower the rate of “breakeven” employment growth: the number of new jobs an economy must create each month to keep unemployment steady.
This is according to a new report from Oxford Economics, whose authors think the two forces will dramatically shrink labor supply, lowering the breakeven rate to zero in 2027 and into negative territory by 2028.
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“Population aging and the sharp reduction in net immigration will mean that in the next years the labor market won’t need to add any jobs and can even lose a modest number of jobs for the unemployment rate to remain stable,” Bernard Yaros, one of the report’s authors, told Newsweek. “This is something we haven’t seen before, at least since the 1960s.”
America’s Shrinking Workforce
Despite a number of economic headwinds and significant volatility in monthly payrolls growth over the past few years, jobless claims have remained low by historical standards—a fact that experts have often attributed to the shrinking size of the U.S. workforce.
As Yaros and his fellow author, Matthew Martin, detail, the post-pandemic immigration surge in 2022 and 2023 was a “major boost to the labor force” and pushed the breakeven pace of employment growth to 200,000 per month. However, more “restrictive immigration policies,” alongside an aging population, have brought this down to around 50,000 a month, and look set to drag it lower.
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The White House estimates that the Trump administration has deported over 605,000 people since the president’s return to office in January 2025. This is on top of the secondary effects on net migration from declining Southern Border crossings, "self-deportations" and new barriers to legal entry.
The Washington, D.C.-based policy organization Brookings recently estimated that the U.S. saw negative net immigration last year for the first time in over a decade, a trend that is expected to continue through 2026. Its researchers found that net immigration likely ranged between -295,000 and -10,000 in 2025, and projected that this will range between -925,000 and +185,000.
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The Retirement ‘Tsunami’ and the US Labor Market
Meanwhile, many institutions have attempted to chart the scale and potential impacts of the oncoming boomer retirement “wave” or “tsunami” on the U.S. economy.
Oxford Economics researchers project that the lion’s share of baby boomer retirements will take place between 2026 and 2029, removing a significant share of workers from the labor force. At the same time, an aging population reduces overall labor-force participation because more Americans are leaving work than entering it.
Most anticipate this will mean widespread workforce exits, shortages of talent and institutional knowledge, and increased pressure on public pension systems and healthcare services.
In separate research published in mid-July, Oxford Economics researchers projected that Trump’s “crackdown on unauthorized immigration has the potential to tighten labor market conditions," meaning fewer workers and more openings, but that this had not yet occurred. When it does, researchers said the effects will be most felt in regions that rely on undocumented labor, many of which are located in California, Florida, New Jersey, New York, and Texas.
However, Martin and Yaros said the declining breakeven rate—even if this enters negative territory—could prevent an increase in unemployment, with job growth propped up by perennially strong industries like health care.
“Today’s restrictive immigration policies remain in place over the remainder of the current administration, while the tsunami of baby boomer retirements, which peaks between 2026 to 2029, squeezes the labor force,” they wrote. “At the same time, persistent strength in acyclical industries—particularly healthcare—will help keep actual job growth slightly positive, thereby applying gentle downward pressure on unemployment over the next couple of years.”
Contact Newsweek editors on this story: Ben Kelly and Sam Wilson.
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