Early evidence suggests that White House policy is shrinking the immigrant labor force, contributing to a broader drawdown in the U.S. labor pool, according to several leading economists.
Economists from financial firms, research institutions, and think tanks told CNBC — and recent analyses confirm — that a sustained reduction in immigrant workers could create long-term risks for the U.S. economy. With America’s native-born workforce aging, fertility rates low, and baby boomers retiring in large numbers, the nation is expected to rely increasingly on immigrants to sustain both population and labor force growth.
“The downward shift in the immigrant labor force is definitive,” said Mark Zandi, chief economist at Moody’s. “There’s no debate what’s going on there.”
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Trump’s “Aggressive” Immigration Agenda
President Donald Trump has described his immigration strategy as “very aggressive,” with moves ranging from expanded deportations and the planned end of birthright citizenship to restrictions on asylum. His administration is also preparing to scrap the H-1B visa lottery for specialty occupations like tech, architecture, and law, replacing it with a system that favors higher-wage earners.
Many of these actions face ongoing legal challenges.
Evidence in the Numbers
The Bureau of Labor Statistics (BLS) reports that the foreign-born labor force has declined by 1.2 million since January, falling to 32.1 million in July.
While native-born labor force participation slipped just 0.3 percentage point year-over-year in July, the decline was much steeper among foreign-born workers, who saw a 1.2 percentage point drop, according to a J.P. Morgan analysis.
“Signs are mounting that the foreign-born labor force is shrinking due to the Trump administration’s immigration policies,” wrote Nancy Vanden Houten, lead economist at Oxford Economics, in an Aug. 1 research note.
Stephen Brown, deputy chief North America economist at Capital Economics, called the BLS-reported decline “very dramatic” and larger than anticipated.
“Many immigrants appear to be leaving the labor force,” added David Kelly, chief global strategist at J.P. Morgan Asset Management.
The overall U.S. labor force has contracted by 402,000 people between January and July, down to 170.3 million, according to BLS data, marking three consecutive months of decline.
Crackdowns and Economic Ripples
Some of the shrinkage is linked to policy enforcement. Immigration and Customs Enforcement (ICE) arrests have surged, more than tripling since 2024 to 1,100 per day as of mid-June, according to Oxford Economics.
Matthew Martin, a senior U.S. economist at the firm, found that labor force growth has stagnated in states such as Texas and Florida, where immigrant arrests per capita are highest, while states with fewer crackdowns, like California and New York, have recorded modest gains.
Meanwhile, Jerome Powell, chair of the Federal Reserve, acknowledged immigration as a labor supply constraint: “Because of immigration policy really, the flow into our labor forces is just a great deal slower,” Powell said on July 30.
Sector-Specific Impact
Industries that depend heavily on immigrant labor — hospitality, restaurants, construction, and home health care — have seen flat job growth since early 2025, according to Jed Kolko, senior fellow at the Peterson Institute for International Economics and former Commerce Department official. By contrast, the rest of the private sector grew jobs at a 0.6% pace in July.
A Bank of America Institute report released Tuesday warned of “serious financial risks for contractors” if labor shortages worsen, noting that average wage growth in construction hit 8% in July, nearly double the national average. About 34% of construction workers are immigrants, the report said, with trades like drywall installation approaching 60% immigrant representation.
That shortage already costs the economy $10.8 billion annually in project delays and adds an average of $2,600 to the price of new single-family homes, according to a June analysis by the Home Builders Institute, the National Association of Home Builders, and the University of Denver.
White House Response
In an emailed statement, White House spokesperson Abigail Jackson defended the administration’s policies, insisting that “there is no shortage of American minds and hands to grow our labor force.” She said Trump’s agenda aims to expand job opportunities for U.S.-born workers while enforcing immigration laws.
The administration has also pointed to steps meant to support legal immigrants, including the creation of the Office of Immigration Policy in June to streamline work visa processes, and an April executive order to boost high-paying skilled trade jobs.
Why Economists Are Concerned
A shrinking labor force directly threatens long-term U.S. growth potential. “If we want the type of economic growth that we historically consider successful, then the demographic reality is that we’re going to have to increase inflows of immigrants,” said Michael Strain, director of economic policy studies at the American Enterprise Institute. “There’s no real way around that.”
Without immigration, the Congressional Budget Office projects that the U.S. population will begin to shrink by 2033, with low fertility rates exacerbating the trend.
Economists also warn of knock-on effects: fewer workers mean reduced tax revenue for programs like Social Security, and tighter labor markets could drive up wages in ways that stoke inflation.
Still, some argue the labor force contraction may not persist. “We didn’t see net-out migration in [Trump’s] first term,” Strain said. “That’d cause all sorts of problems for businesses, for key sectors of the economy the president cares about, like construction. I’d be surprised if that’s where we end up. But who knows?”