Feb 23: Bandhan AMC today released a detailed analysis on the current dynamics of the US labor market in its latest note, Macro Shots: FOMC – Time To Pause and Ponder, authored by Mr. Sreejith Balasubramanian, Senior Economist – Fixed Income. The report highlights key trends in US labor supply and demand, and the implications for monetary policy.
The analysis notes a significant slowdown in both labor supply and job additions. The US Congressional Budget Office (CBO) has sharply revised down net immigration estimates for 2025–2029 to 3.5 million, half of last year’s projection of 7 million, indicating a constrained labor supply. Meanwhile, non-farm payroll (NFP) growth has remained weak, with the monthly average of job additions from August 2025 to January 2026 at just 14,000. Benchmark revisions further reduced 2025 job additions from an initially reported 584,000 to 181,000, reflecting a revised monthly average of approximately 15,000.
Mr. Balasubramanian explains,
“The slowdown in labor supply and demand has shifted the breakeven job addition – the level needed to keep the unemployment rate stable – to a much lower range. With unemployment moderating from 4.5% in November 2025 to 4.3% in January 2026, even modest job growth does not necessarily indicate a stronger labor market.”
The note underscores that these trends present the Federal Open Market Committee (FOMC) with a crucial juncture: to assess the interplay of slowing job growth, tightening labor supply, and broader macroeconomic conditions before deciding on future interest rate moves.