This paper studies how the establishment of farmland transfer markets affects the agricultural sector’s role as an employment buffer in developing economies. Developing a general equilibrium model that incorporates rural land institutions and a frictional urban labor market, I show that the farmland market amplifies the unemployment effects of adverse urban labor market shocks by weakening agriculture’s capacity to absorb displaced workers. This effect operates through land rental adjustments, which lower the elasticity of urban labor supply. Quantitative results calibrated to China indicate that this mechanism is economically significant, leading to higher unemployment rates and substantial welfare losses during adverse urban labor market shocks. The findings highlight that farmland market reforms in developing economies should account for their interaction with urban employment pressures.