Isn't the job prospect in theoretical/mathematical physics too bad to justify doing a PhD in it?
Your question assumes that the only possible job destination for theoretical and mathematical physics is in faculty positions. This is not the case. There are many additional fields (finance, consulting, computer gaming, medical imaging, and so on) where the demand for PhD's with training in mathematical analysis is growing. 

Now if your goal is a faculty position, that may be a different matter. But clearly the overall demand is still great enough that people continue to get doctorates in the discipline, which suggests that people are still finding employment.