I'm a
medical physicist and so I'm not really in a great position to talk about job opportunities for people on the theoretical side of things. However, in academia a reasonable rule of thumb is that the average professor will supervise about 10 graduate students through to the completion of a PhD over a career. One of those, one will go on to replace the professor. The others are likely going to leave academia eventually.
What they end up doing career-wise will depend a lot on the skills that they develop along the way and the opportunities that come along when they graduate or get out onto the market. I'm sure in some cases you'll have people that will go on into teaching roles at universities or community colleges that don't have PhD programs, for example. But a lot are going to leave academia and those that remain face a very competitive environment - to the point where simply putting your nose to the grindstone won't allow you to out-compete the others.