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The Trump administration’s crackdown on immigration is at a cost to weaken the labor market, economists say.
Forecasters surveyed by Bloomberg reported that on Friday, August 1, the Labor Bureau acquired 109,000 jobs in July, with an average of 130,000 people a month this year, up from 147,000 in June.
While business demand for workers is also flagged amid uncertainty over President Donald Trump’s tariffs, the reduction in job seekers’ supply has overwhelmed the growth in pay for industries with large stakes in foreign-born workers, such as agriculture, construction, restaurants and food production.
Food manufacturing employment has stagnated this year after a sharp rise since the pandemic, according to figures from the Ministry of Labor. Construction salaries increased by 35,000 in the first half of 2025, compared to 104,000 in the same period last year.
“This crackdown is beginning to have a major impact on labor supply,” Capital Economics wrote in a recent note to clients.
Why is the participation rate of the US workforce so low?
The US workforce includes people looking for employment and employment — shrinks by 130,000 in June and 364,000 from January. Adult share of the workforce fell to 62.3% last month, the lowest since December 2022.
Other units have also limited labor supply, according to Dante Dianio, an economist at Moody’s analysis. But for now, he said, “The immigration story is a much bigger story.”
According to Capital Economics, the number of immigrants detained by Immigration Customs Enforcement (ICE) rose from an average monthly average of 15,000 in 2024 to about 40,000 in early June. And deportation has recently risen from a fee of 400,000 a year at the beginning of the year to around 600,000, Goldman Sachs said. Immigrants also voluntarily leave the country at an annual rate of around 100,000, the research company said.
Meanwhile, according to Goldman reports, immigrants entered the country on other humanitarian reasons, seeking asylum at an annual rate of 300,000, down from an annual rate of 300,000 in May and June to 600,000.
Capital economics said the foreign-born workforce has been contracted by over a million people over the past four months. In May, a record 5.4 million people who had left the workforce altogether were quoting worker figures, Moody’s said.
According to capital economics, further arrests and deportation may have been restored in July after the Supreme Court recently lifted the judge’s order and demanded that the judge’s order first demanded that they be harmed, Capital Economics said.
“That’s pretty awful.”
Under the Trump administration’s policies, many immigrants have lost their “temporary protected status” and have been able to remain in the United States due to concerns about their country’s safety.
As a result, businesses have lost a prominent part of their workforce, said Amy Peck, an attorney at Jackson Lewis Law Office in Omaha, Nebraska. Many foreign-born workers struggle with unskilled jobs, such as washing dishes and moving parts across the floor of the elements.
“Even with higher wages, some jobs are not attractive to American workers,” she said.
Restaurants are dealing with early closures and integrations while manufacturers eliminate shifts, Peck said.
“They’re coming up with creative ways to deal with the decline in the workforce,” she said. “That’s pretty bad.”
How do immigration contribute to the workforce?
Development shows an extraordinary reversal. Immigration accounted for 88% of the country’s labor force growth from 2019 to 2024, according to a report by the US Policy Foundation, a non-partisan research organization. It has freed up a widespread pandemic-related workforce shortage that drives inflation.
Is immigration to the US declining?
However, after an average of 2.6 million to 3.3 million between 2022 and 2024, net immigration to the United States, including those coming and going from the country, settled at a stable annual rate of 500,000, according to the Congressional Budget Office and Goldman Sachs. This is comparable to about 900,000 before the pandemic.
Foreign-born people accounted for 19.1% of the workforce in June, down from 19.8% in March.
“It’s difficult or impossible for some businesses in the (impacted) industry to replace lost workers,” Moody economist Marisa Dinaterre wrote in the report. “This puts upward pressure on inflation as wages rise and businesses increase prices to provide a higher wage bill,” she said.
The immigration-related workers shortage is likely to reduce the country’s potential annual economic growth from 2% to 1%, she added.
This trend created split-screen photos of the American job market. In industries such as construction, hospitality and agriculture, employers cannot find workers due to immigration restrictions.
In the white-collar sector, workers cannot find jobs as employers pull back jobs amid wider economic uncertainty, Dianio said.
Overall, the economy-wide, a small pool of job seekers roughly offset soft demand, lowering the unemployment rate in June from 4.2% to 4.1%.
Capital Economics said stable unemployment rates could prevent the Fed from cutting interest rates this year, despite flagging employment growth.
However, Deantonio believes that even with stable unemployment rates, a significant drop in employment profits will encourage the Fed to act.
