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(Bloomberg Business) — Is it time to start lowering expectations on what constitutes a healthy job market? Since the start of 2013, payrolls have climbed at an average monthly pace of 225,000. And government data out tomorrow is expected to show a similar-sized gain in July, according to forecasters surveyed by Bloomberg.

But as the job market approaches what many economists — including some at the Federal Reserve — believe constitutes full employment, investors, job seekers and central bankers all may need to gradually adjust their sights downward to a slower pace of hiring, economists say. Why? Because continued gains in payrolls at a 200,000-plus monthly pace would fairly quickly push the unemployment rate down to levels that would be too low to sustain without spurring inflation.

To see why that would happen, you have to figure how much hiring needs to increase each month to cover the growth of the working-age population. That’s a much lower number than it used to be, thanks to reduced immigration and the ongoing retirement of the baby boomers.

The old rule of thumb was that it took payroll gains of as much as 150,000 per month to keep unemployment steady. If gains were bigger than that, the jobless rate would tend to go down. Smaller rises would lead to more people out of work.
Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, reckons that number is now around 100,000. Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, pegs it even lower, at about 75,000. Perhaps more importantly, a number of Fed researchers, including Daniel Aaronsonat the Chicago Fed, reckon that the trend growth rate of payrolls is much slower than it was before.

Of course, hiring doesn’t need to slow down dramatically right away — and neither Zandi nor Feroli is saying it will. At 5.3 percent in June, the unemployment rate is still above the 5 to 5.2 percent range that most Fed policy makers reckon is equivalent to full employment. That means payrolls can still rise at a good clip — and joblessness can continue to fall  — without causing any undue consternation at the central bank.

What’s more, as Fed Chair Janet Yellenhas frequently pointed out, there’s a lot of labor market slack not captured by the jobless number, including the millions of Americans working part-time who would prefer full-time jobs.
Still, with full employment now in sight, investors shouldn’t be too surprised to see payroll growth start to slow. Such a development would be less of a warning that the economy was giving way and more of a sign that the job market was adjusting to its new version of normal.

To contact the author on this story: Rich Miller at rmiller28@bloomberg.net To contact the editors on this story: Aki Ito at aito16@bloomberg.net Mark Rohner at mrohner@bloomberg.net