\n<\/p>\n
People in Tijuana, Mexico, look though the U.S.-Mexico border wall at Border Field State Park on Aug. 17, 2025 in Imperial Beach, California. <\/p>\n
Kevin Carter | Getty Images News | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
Early evidence suggests that White House policy is reducing the size of the immigrant labor force, in turn contributing to a recent drawdown in the overall U.S. labor<\/a> pool, according to several economists.<\/p>\n CNBC spoke with a range of economists from financial firms, economic research institutions and think tanks, and also reviewed recent research notes and analyses that economists have published on immigration<\/a> and the job market.<\/p>\n If a reduction in the immigrant labor force is sustained, such a trend would be a concern for the U.S. economy, those experts have said or written.<\/p>\n That\u2019s because the economy will increasingly rely on immigrants<\/a> to fuel population and labor force growth given demographic trends among the U.S.-born populace, like retirements among baby boomers and lower fertility rates, they said.<\/p>\n The downward shift in the immigrant labor force in recent months is \u201cdefinitive,\u201d said Mark Zandi, chief economist at Moody\u2019s.<\/p>\n \u201cThere\u2019s no debate what\u2019s going on there,\u201d Zandi said.<\/p>\n<\/div>\n President Donald Trump<\/a> has pursued an immigration agenda that he\u2019s referred to as<\/a> \u201cvery aggressive.\u201d<\/p>\n The White House has sought to expand and expedite deportations, end birthright citizenship and restrict access to asylum, among other actions, for example. Many measures are being challenged in court.<\/p>\n The Trump administration is also readying a rule<\/a> to end the lottery for H-1B visas \u2014 temporary work visas for college graduates in \u201cspecialty<\/a>\u201d fields like architecture, law and tech<\/a> \u2014 and adopt a selection process that favors higher-wage earners.<\/p>\n Available data makes it hard to track what\u2019s happening to immigration flows and the immigrant labor pool in real time, economists said.<\/p>\n Some point to Bureau of Labor Statistics data as one signal.<\/p>\n The size of the foreign-born labor force has declined by about 1.2 million people since January, to 32.1 million total people in July, BLS data<\/a> shows. (Some government data distinguishes between \u201cforeign-born\u201d and \u201cnative-born\u201d workers \u2014 or, immigrants versus those born in the U.S.)<\/p>\n Nancy Vanden Houten, lead economist at Oxford Economics, cited the data in an Aug. 1 research note.<\/p>\n \u201c[S]igns are mounting that the foreign-born labor force is shrinking due to the Trump administration\u2019s immigration policies,\u201d she wrote.<\/p>\n<\/div>\n The U.S. labor force includes<\/a> all people age 16 and older who are actively working or looking for work.<\/p>\n The BLS\u2019 reported decline in the foreign-born labor force has been \u201cvery dramatic\u201d and larger than expected, said Stephen Brown, deputy chief North America economist at Capital Economics.<\/p>\n In July, the labor force participation rate had declined 0.3 percentage point for native-born workers<\/a> compared with a year earlier, but had fallen by a much larger 1.2 percentage points for foreign-born workers<\/a>, according to a J.P. Morgan analysis<\/a>.<\/p>\n<\/div>\n \u201c[M]any immigrants appear to be leaving the labor force, wrote David Kelly, chief global strategist at J.P. Morgan Asset Management.<\/p>\n White House spokesperson Abigail Jackson said in an emailed statement that the Trump administration is committed to helping U.S. employers \u201censure they have the legal workforce they need to be successful.\u201d<\/p>\n \u201cThere is no shortage of American minds and hands to grow our labor force, and President Trump\u2019s agenda to create jobs for American workers represents this Administration\u2019s commitment to capitalizing on that untapped potential while delivering on our mandate to enforce our immigration laws,\u201d Jackson wrote.<\/p>\n<\/div>\n Some economists say the BLS data on the foreign-born and native-born labor force segments isn\u2019t a reliable gauge<\/a> of near-term trends, due to various quirks in how it\u2019s collected and reported.<\/p>\n Trump questioned the accuracy of BLS statistics and fired the bureau\u2019s chief<\/a> in August after a monthly report showed unexpectedly weak job growth.<\/p>\n But there\u2019s other evidence that economists point to that also suggests the immigrant labor pool is shrinking.<\/p>\n For example, job growth among industries that rely more heavily on undocumented immigrants has been \u201csignificantly weaker\u201d than in the rest of the private sector, said Jed Kolko, a senior fellow at the Peterson Institute for International Economics and former undersecretary for economic affairs at the U.S. Department of Commerce during the Biden administration.<\/p>\n<\/div>\n Job growth in those industries \u2014 such as hotels, restaurants, construction and home health aides \u2014 has been flat since the start of 2025, said Kolko. In July, jobs grew at a 0% rate in immigrant-heavy industries, he found.<\/p>\n Meanwhile, job growth has slowed in the rest of the private sector \u2014 a roughly 0.6% pace in July \u2014 but the deceleration wasn\u2019t as stark, he said.<\/p>\n Kolko analyzed federal data to calculate the three-month average annualized rate of employment growth in respective industries.<\/p>\n<\/div>\n Nancy Vanden Houten<\/p>\n lead economist at Oxford Economics<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n Matthew Martin, senior U.S. economist at Oxford Economics, found an additional link between immigration policy and its impact on the labor force.<\/p>\n Labor force growth has been \u201cstagnant\u201d in states like Texas and Florida with high immigrant arrests per capita, he wrote in an Aug. 4 research note, citing Immigration and Customs Enforcement data.<\/p>\n \u201cStates such as Texas and Florida have seen more intense crackdowns than California, New York, and New Jersey,\u201d Martin wrote. The \u201clow-arrest\u201d states have seen positive labor force growth in 2025, by contrast, he wrote.<\/p>\n \u201cThe data show that while the foreign-born labor force in low arrest-to-population states has increased since the beginning of the year, the labor force in high-arrest states flatlined,\u201d he wrote.<\/p>\n<\/div>\n Vans leave an agricultural facility where U.S. federal agents and immigration officers carried out an operation, as U.S. federal agents stand guard , in Camarillo, California, U.S., July 10, 2025. <\/p>\n Daniel Cole | Reuters<\/p>\n<\/div>\n<\/div>\n<\/div>\n Nationwide, immigrant arrests have more than tripled since 2024, to more than 1,100 per day through mid-June, wrote Martin, citing ICE data.<\/p>\n Last month, Jerome Powell<\/a>, chair of the Federal Reserve, cited immigration policy as a factor behind the slowdown in the labor supply.<\/p>\n \u201c[B]ecause of immigration policy really, the flow into our labor forces is just a great deal slower,\u201d Powell said<\/a> during a news conference on July 30.<\/p>\n The total U.S. labor force \u2014 including immigrants and native-born workers \u2014 has fallen for three consecutive months, according to BLS data. It has declined by 402,000 people from January to July, to about 170.3 million, the BLS reported.<\/p>\n More from Personal Finance:<\/strong> Arrests and deportations, fear of showing up to the workplace, and fewer flows of immigrants into the U.S. may be playing a role, economists said.<\/p>\n Two programs that have given roughly 1.8 million immigrants from troubled countries the temporary right to live and work in the U.S. are being phased out this year, wrote Kelly of J.P. Morgan. This change in status may reduce labor supply by more than 1 million workers, he wrote, citing J.P. Morgan research.<\/p>\n Of course, a decline in the labor supply isn\u2019t only a function of immigration.<\/p>\n<\/div>\n For example, unemployed people discouraged by the difficulty of finding a job right now<\/a> may opt to sit on the sidelines instead of looking for work, meaning they wouldn\u2019t be counted in the labor force, said Brown of Capital Economics.<\/p>\n The White House has also taken steps that it says will boost employment among immigrants who are in the U.S. legally.<\/p>\n The Department of Labor established<\/a> the Office of Immigration Policy in June, which the administration has said will streamline the process to secure temporary and permanent work visas, for example. Trump also signed<\/a> an executive order in April seeking to support high-paid, skilled trade jobs.<\/p>\n<\/div>\n A U.S. Customs and Border Protection (CBP) Border Patrol agent stands at Border Field State Park with the U.S.-Mexico border wall in the background on Aug. 17, 2025 in Imperial Beach, California. <\/p>\n Kevin Carter | Getty Images News | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n Growth in the labor force is one of the \u201ckey\u201d things determining how fast the U.S. economy can expand and how productive companies are, for example, Vanden Houten of Oxford Economics said in an interview.<\/p>\n A sustained decline in the size of the labor force \u2014 which is far from being assured \u2014 would be a concern, said Michael Strain, director of economic policy studies at the American Enterprise Institute, a right-leaning think tank.<\/p>\n \u201cIf we want the type of economic growth that we historically consider successful, then the demographic reality is that we\u2019re going to have to increase inflows of immigrants,\u201d Strain said. \u201cThere\u2019s no real way around that.\u201d<\/p>\n Without immigration, the population would shrink starting in 2033, partly because fertility rates are projected to remain low, according<\/a> to the nonpartisan Congressional Budget Office.<\/p>\n<\/div>\n Jerome Powell<\/p>\n chair of the Federal Reserve<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n Additionally, a smaller labor pool might put pressure on employers to raise wages to attract talent, potentially exacerbating inflation, and would bring in less tax revenue to fund programs like Social Security, economists said.<\/p>\n The construction industry, which already suffers from labor shortages, is at risk of wage inflation, for example, according to a Bank of America Institute report<\/a> published Tuesday.<\/p>\n Average wage growth in July approached 8% in the construction industry, nearly double the national average, according to the report.<\/p>\n \u201cImmigration actions could potentially deepen workforce shortages, drive up costs and create serious financial risks for contractors,\u201d the Bank of America report said.<\/p>\n<\/div>\n Construction workers build a new home in Altadena, California on August 15, 2025.<\/p>\n Mario Tama | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n About 34% of construction workers are immigrants, versus the 20% average across all sectors, the report said. In trades like drywall installers or plasterers, the share is closer to 60%, it said.<\/p>\n A shortage of skilled labor already costs the U.S. economy about $10.8 billion per year due to longer construction times and raises the price of new single-family homes by about $2,600, on average, according to a joint analysis<\/a> published in June by the Home Builders Institute, the National Association of Home Builders and the University of Denver.<\/p>\n However, some economists are skeptical that the U.S. will suffer a prolonged reduction in the immigrant labor force.<\/p>\n The Trump administration\u2019s plan likely isn\u2019t to have \u201cnet-out migration,\u201d Strain said.<\/p>\n \u201cWe didn\u2019t see net-out migration in [Trump\u2019s] first term,\u201d Strain said. \u201cThat\u2019d cause all sorts of problems for businesses, for key sectors of the economy the president cares about, like construction, and I\u2019d be surprised if that\u2019s where we end up.\u201d<\/p>\n \u201cBut who knows?\u201d he added.<\/p>\n<\/div>\n\u2018Signs are mounting\u2019<\/h2>\n
\u2018Significantly weaker\u2019 job growth<\/h2>\n
\n
Labor force growth is \u2018a great deal slower\u2019<\/h2>\n
\u2018Job hugging\u2019 has replaced job-hopping<\/a>
Fewer young adults reach key life, money milestones<\/a>
Why investors shouldn\u2019t try to be a \u2018hero\u2019 in this economy<\/a><\/p>\nWhy a shrinking labor force is a concern<\/h2>\n
\n