U.S. Immigration Crackdown is Shrinking the Labor Market and Changing Job Growth Dynamics
A sharp drop in immigration under President Donald Trump could be reshaping the U.S. labor market in ways many Americans haven’t fully realized. According to a new analysis by Goldman Sachs, policies like increased deportations, travel bans, and visa restrictions have led to an 80% collapse in net immigration, drastically reducing the pool of new workers entering the economy.
Immigration Plummets, Labor Supply Shrinks
Goldman Sachs reports that while the U.S. welcomed roughly 1 million immigrants per year throughout the 2010s, that number fell to 500,000 in 2025—and is projected to drop further to just 200,000 in 2026. The bank attributes this steep decline directly to the administration’s aggressive immigration policies, including halts on visa processing for 75 countries and the loss of Temporary Protected Status for certain groups of immigrants.
Fewer incoming workers are forcing economists to rethink the fundamentals of the U.S. labor market. Traditionally, the economy needed around 70,000 new jobs per month to keep unemployment stable. With immigration falling sharply, Goldman now estimates that number has dropped to just 50,000 jobs per month. In other words, fewer new workers mean the economy needs fewer new jobs to maintain balance.
What This Means for Job Reports
This shift has a subtle but important effect on economic data. A monthly jobs report that might have signaled weakness in the past could now be interpreted as stable hiring, simply because the labor pool is smaller. Goldman’s economists describe this as an “early step toward labor market stabilization,” noting that missing immigrant workers are changing how we interpret hiring trends.
At the same time, the crackdown may be pushing some workers into the informal economy. Stricter enforcement encourages immigrants to take jobs that aren’t counted in official statistics, making it harder for the Federal Reserve and other agencies to gauge the true state of employment.
Broader Economic Implications
The shortage of workers isn’t just affecting hiring numbers—it’s reshaping productivity and corporate strategy. Some experts, like Stanford’s Erik Brynjolfsson, see an opportunity for technology, especially AI tools, to compensate for labor shortages. Others worry that companies could use this moment to scale back white-collar work, much as they did with blue-collar jobs in previous decades.
Meanwhile, overall job openings have declined below pre-pandemic levels, with roughly 7 million positions available, and tech employment has taken a noticeable hit. Goldman Sachs’ chief economist Jan Hatzius warns that while the labor market may stabilize, risks remain skewed toward disruption, especially if AI adoption accelerates faster than expected.
Looking Ahead
Other analysts are echoing the cautionary tone. Michael Pearce of Oxford Economics has noted that the U.S. may soon reach a “break-even” point in job growth, while J.P. Morgan strategist David Kelly predicted minimal growth in the workforce over the next five years, driven by both reduced immigration and an aging native-born population.
For now, the unemployment rate has stabilized around 4.3%, suggesting the economy is holding steady. But the long-term effects of this labor shortage—from slower population growth to hidden employment in the shadows—could reshape the U.S. workforce in ways policymakers and businesses are only beginning to understand.