White House Economic Advisor Warns of Slower Job Gains Amid Productivity Surge and Border Changes

Kevin Hassett, director of the White House National Economic Council, warned Monday that U.S. job gains could fall in coming months due to slower labor force growth and higher productivity levels—a trend also shaping Federal Reserve policy discussions.

Monthly payroll employment increased by an average of 53,000 positions in November and December, compared with an annualized gain of 183,000 jobs per month over the decade prior to the COVID-19 pandemic. This growth rate significantly exceeds the monthly job additions seen during the later stages of the Biden administration’s economic expansion.

Hassett noted that a substantial portion of recent job growth stemmed from immigration policies that expanded the workforce, measures President Donald Trump has since reversed. This shift complicates economists’ efforts to determine whether slowing labor market activity reflects economic weakness or insufficient workers to fill available positions.

The White House adviser proposed that rising productivity—allowing each worker to produce more output—could enable sustained economic growth even with fewer employees and lower monthly job additions.

Hassett stated that the combination of strong GDP growth and a significant decline in the labor force “because of illegals (undocumented migrants) leaving the country” might lead to reduced employment numbers. “You should expect slightly smaller job numbers that are consistent with high GDP growth right now,” Hassett said.

“We shouldn’t panic if you see a sequence of numbers lower than usual, because population growth is going down and productivity growth is skyrocketing. It’s an unusual set of circumstances.”

The Labor Department will release its delayed January employment report on Wednesday. A Reuters survey of economists indicated nonfarm payrolls likely rose by 70,000 jobs in January following a December increase of 50,000.

U.S. unemployment remained at 4.4% in December, with economists anticipating no change for January.

Hassett’s remarks align with Fed Chair Jerome Powell’s recent comments after the central bank’s latest policy meeting. Powell described U.S. policymakers as facing a “very challenging and quite unusual situation” where both demand and supply of workers are declining.

This scenario could explain slower-than-typical job growth while maintaining stable unemployment rates. Powell noted that it makes the labor market “a difficult time to read,” because monetary policy responses would depend on whether the slowdown stems from insufficient workers or weak economic demand.

If worker shortages persist due to deportations, hiring bottlenecks and rising wages could emerge—potentially signaling inflationary pressures and justifying cautious rate cuts by the Federal Reserve. Conversely, if job growth slows from weak demand, the Fed might lower interest rates to stimulate hiring.

President Trump has criticized Powell and the central bank for failing to deliver deeper rate cuts than he advocates to spur economic activity.

Similarly, Kevin Warsh, a recent Trump-nominated Fed chair candidate awaiting Senate confirmation, has suggested that higher productivity could mitigate inflation concerns and alter monetary policy trajectories.

Powell and most Federal Reserve policymakers acknowledge that persistent strong productivity growth may continue but caution against basing short-term decisions on hypothetical scenarios.

Dario Perkins, managing director of global macro at TS Lombard, emphasized: “The demand versus supply question is important for monetary policy. If it’s demand, the Fed needs to intervene … If it’s supply, inflation will be stickier, and the Fed should hold firm.”

Perkins added that there is already sufficient demand stimulus in place, which could become problematic if labor supply is impaired.