US job growth is slowing to a virtual standstill. If this were tolerable to policymakers or acceptable to investors before the Iran war, it shouldn’t be now.

The labour market has been steadily deteriorating for ​some time, but this has been masked by the headline unemployment rate, which has drifted higher, but only gradually.

At 4.4%, it remains ‌low by historical standards.

The labour market is effectively stagnating.

The closely-watched Job Openings and Labour Turnover Survey, or JOLTS report, released this week showed that overall hiring now matches the April 2020 low.

The worry is that it isn’t going to pick up much in the coming months, if at all.

Figures from the Bureau of Labour Statistics on Friday are expected to show the US economy created a net 60,000 nonfarm payroll jobs ​in March, giving a monthly average in the first quarter of around 30,000.

The six-month average monthly payroll growth is close to zero, and was even negative ​a few months ago.

For the largest economy in the world, a $30 trillion juggernaut with a labour force of around 170 ⁠million, that isn’t sustainable or desirable.

Job growth drives up incomes, which increases spending, economic activity, and ultimately growth.

Low hiring also slows the flow of income tax into government ​coffers, putting a strain on the public finances.

BREAK-EVEN JOB GROWTH NOW AROUND ZERO

The puzzle of a fairly steady unemployment rate despite evaporating job growth is explained by the fall ​in “break-even” job growth. That’s the increase in employment needed to keep the unemployment rate stable.

Three years ago, it was around 250,000 jobs per month, according to a Dallas Fed paper published this week. But it has declined steadily since, and is now virtually zero, meaning the unemployment rate can remain steady even if the economy is barely creating any jobs.

Ordinarily, a slowing demand for workers should be a ​red flag that the unemployment rate is about to rise, the economy is slowing, and recession risks are rising.

Job growth below estimated breakeven levels is an even ​starker warning.

But labour supply is also shrinking rapidly.

That’s largely due to the Trump administration’s policies to slash net immigration, the longer-term effects of which remain to be seen.

Right now, though, they ‌are offsetting the ⁠slump in hiring.

From the outside, the jobs market may seem stable if labour supply and demand are roughly equal and the unemployment rate is mostly stable. But it’s not a healthy labour market.

NO LONGER SO ROBUST OR CONFIDENT

This delicate balance is now more vulnerable to the potential economic headwinds gathering force, and equally, the economy is more vulnerable to the fragile labour market breaking.

The economy is facing structurally higher energy prices and rising inflation pressures due to the supply shocks triggered by the Middle East conflict.

They will persist ​at least for the rest of this ​year, and probably beyond, meaning consumers’ bills ⁠and companies’ costs are going to rise.

Oil is $100 a barrel and likely to average close to that for the rest of the year, gasoline is now above $4 a gallon, and household budgets are being squeezed.

Meanwhile, businesses are grappling with rising input costs such as energy and ​transportation, financial conditions have tightened, and spring and summer seasonal factors tend to be a headwind to hiring.

The Federal Reserve paused ​its interest-rate-cutting cycle in ⁠January, and policymakers seemed more confident that downside risks to the labour market were diminishing.

Chair Jerome Powell indicated that strong productivity growth, fueled by artificial intelligence, could complement “low-hire, low-fire” labour market dynamics and help keep inflation in check.

Until the Iran war, this was not an uncommon view. It’s looking rather less robust now, just like the labour market.

(The opinions expressed here ⁠are those ​of Jamie McGeever, a columnist for Reuters.)