Personal Finance
Trump immigration policy may be shrinking labor force, economists say
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.
Kevin Carter | Getty Images News | Getty Images
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 pool, according to several economists.
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 and the job market.
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.
That’s because the economy will increasingly rely on immigrants 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.
The downward shift in the immigrant labor force in recent months is “definitive,” said Mark Zandi, chief economist at Moody’s.
“There’s no debate what’s going on there,” Zandi said.
‘Signs are mounting’
President Donald Trump has pursued an immigration agenda that he’s referred to as “very aggressive.”
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.
The Trump administration is also readying a rule to end the lottery for H-1B visas — temporary work visas for college graduates in “specialty” fields like architecture, law and tech — and adopt a selection process that favors higher-wage earners.
Available data makes it hard to track what’s happening to immigration flows and the immigrant labor pool in real time, economists said.
Some point to Bureau of Labor Statistics data as one signal.
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 shows. (Some government data distinguishes between “foreign-born” and “native-born” workers — or, immigrants versus those born in the U.S.)
Nancy Vanden Houten, lead economist at Oxford Economics, cited the data in an Aug. 1 research note.
“[S]igns are mounting that the foreign-born labor force is shrinking due to the Trump administration’s immigration policies,” she wrote.
The U.S. labor force includes all people age 16 and older who are actively working or looking for work.
The BLS’ reported decline in the foreign-born labor force has been “very dramatic” and larger than expected, said Stephen Brown, deputy chief North America economist at Capital Economics.
In July, the labor force participation rate had declined 0.3 percentage point for native-born workers compared with a year earlier, but had fallen by a much larger 1.2 percentage points for foreign-born workers, according to a J.P. Morgan analysis.
“[M]any immigrants appear to be leaving the labor force, wrote David Kelly, chief global strategist at J.P. Morgan Asset Management.
White House spokesperson Abigail Jackson said in an emailed statement that the Trump administration is committed to helping U.S. employers “ensure they have the legal workforce they need to be successful.”
“There is no shortage of American minds and hands to grow our labor force, and President Trump’s agenda to create jobs for American workers represents this Administration’s commitment to capitalizing on that untapped potential while delivering on our mandate to enforce our immigration laws,” Jackson wrote.
‘Significantly weaker’ job growth
Some economists say the BLS data on the foreign-born and native-born labor force segments isn’t a reliable gauge of near-term trends, due to various quirks in how it’s collected and reported.
Trump questioned the accuracy of BLS statistics and fired the bureau’s chief in August after a monthly report showed unexpectedly weak job growth.
But there’s other evidence that economists point to that also suggests the immigrant labor pool is shrinking.
For example, job growth among industries that rely more heavily on undocumented immigrants has been “significantly weaker” 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.
Job growth in those industries — such as hotels, restaurants, construction and home health aides — has been flat since the start of 2025, said Kolko. In July, jobs grew at a 0% rate in immigrant-heavy industries, he found.
Meanwhile, job growth has slowed in the rest of the private sector — a roughly 0.6% pace in July — but the deceleration wasn’t as stark, he said.
Kolko analyzed federal data to calculate the three-month average annualized rate of employment growth in respective industries.
[S]igns are mounting that the foreign-born labor force is shrinking due to the Trump administration’s immigration policies.
Nancy Vanden Houten
lead economist at Oxford Economics
Matthew Martin, senior U.S. economist at Oxford Economics, found an additional link between immigration policy and its impact on the labor force.
Labor force growth has been “stagnant” 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.
“States such as Texas and Florida have seen more intense crackdowns than California, New York, and New Jersey,” Martin wrote. The “low-arrest” states have seen positive labor force growth in 2025, by contrast, he wrote.
“The 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,” he wrote.
Labor force growth is ‘a great deal slower’
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.
Daniel Cole | Reuters
Nationwide, immigrant arrests have more than tripled since 2024, to more than 1,100 per day through mid-June, wrote Martin, citing ICE data.
Last month, Jerome Powell, chair of the Federal Reserve, cited immigration policy as a factor behind the slowdown in the labor supply.
“[B]ecause of immigration policy really, the flow into our labor forces is just a great deal slower,” Powell said during a news conference on July 30.
The total U.S. labor force — including immigrants and native-born workers — 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.
More from Personal Finance:
‘Job hugging’ has replaced job-hopping
Fewer young adults reach key life, money milestones
Why investors shouldn’t try to be a ‘hero’ in this economy
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.
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.
Of course, a decline in the labor supply isn’t only a function of immigration.
For example, unemployed people discouraged by the difficulty of finding a job right now may opt to sit on the sidelines instead of looking for work, meaning they wouldn’t be counted in the labor force, said Brown of Capital Economics.
The White House has also taken steps that it says will boost employment among immigrants who are in the U.S. legally.
The Department of Labor established 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 an executive order in April seeking to support high-paid, skilled trade jobs.
Why a shrinking labor force is a concern
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.
Kevin Carter | Getty Images News | Getty Images
Growth in the labor force is one of the “key” 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.
A sustained decline in the size of the labor force — which is far from being assured — would be a concern, said Michael Strain, director of economic policy studies at the American Enterprise Institute, a right-leaning think tank.
“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,” Strain said. “There’s no real way around that.”
Without immigration, the population would shrink starting in 2033, partly because fertility rates are projected to remain low, according to the nonpartisan Congressional Budget Office.
[B]ecause of immigration policy really, the flow into our labor forces is just a great deal slower.
Jerome Powell
chair of the Federal Reserve
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.
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 published Tuesday.
Average wage growth in July approached 8% in the construction industry, nearly double the national average, according to the report.
“Immigration actions could potentially deepen workforce shortages, drive up costs and create serious financial risks for contractors,” the Bank of America report said.
Construction workers build a new home in Altadena, California on August 15, 2025.
Mario Tama | Getty Images
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.
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 published in June by the Home Builders Institute, the National Association of Home Builders and the University of Denver.
However, some economists are skeptical that the U.S. will suffer a prolonged reduction in the immigrant labor force.
The Trump administration’s plan likely isn’t to have “net-out migration,” Strain said.
“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, and I’d be surprised if that’s where we end up.”
“But who knows?” he added.
The Federal Reserve held interest rates steady at the conclusion of its policy meeting on Wednesday.
In what could be Jerome Powell’s last as chair before President Donald Trump’s yet-to-be-confirmed nominee Kevin Warsh takes the helm, central bankers maintained the federal funds rate in a target range of 3.5% to 3.75%.
Inflation has surged since the war with Iran began, leaving policymakers with limited room to act, according to Sean Snaith, the director of the University of Central Florida’s Institute for Economic Forecasting. “We’re in a kind of suspended animation — between Iran and the Fed transition,” Snaith said.
Before the oil shock, inflation was holding above the Fed’s 2% target but not worsening. Now the jump in energy costs could have longer-term inflationary effects, economists say.
For Americans struggling in the face of higher gas prices and overall affordability challenges, the central bank’s decision to keep interest rates unchanged does little to ease budgetary pressures. “The cavalry isn’t coming anytime soon,” Snaith said.
How the Fed decision impacts you
The Fed’s benchmark sets what banks charge each other for overnight lending, but also has a trickle-down effect on many consumer borrowing and savings rates.
Short-term rates are more closely pegged to the prime rate, which is typically 3 percentage points above the federal funds rate. Longer-term rates, such as home loans, are more influenced by inflation and other economic factors.
Credit cards
Most credit cards have a short-term rate, so they track the Fed’s benchmark.
After the Fed cut rates three times in the second half of 2025, the average annual percentage rate has stayed just under 20%, according to Bankrate.
“Without Fed rate cuts, there’s not much reason to expect meaningful declines anytime soon, so carrying a balance will remain very expensive,” said Matt Schulz, chief credit analyst at LendingTree.
Mortgage rates
Fixed mortgage rates, on the other hand, don’t directly track the Fed but typically follow the lead of long-term Treasury rates.
Concerns about how the Iran war will impact the U.S. economy have already pushed the average rate for a 30-year, fixed-rate mortgage up to 6.38% as of Tuesday, from 5.99% at the end of February, according to Mortgage News Daily.
That leaves homeowners with existing low mortgage rates “feeling stuck,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Mortgages, more than any other credit type, work on a churn,” she said, referring to how a dip in rates can boost borrowing activity.
Student loans
Federal student loan rates are also fixed and based in part on the 10-year Treasury note, so most borrowers are somewhat shielded from Fed moves and recent economic uncertainty.
Current interest rates on undergraduate federal student loans made through June 30 are 6.39%, according to the U.S. Department of Education. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year note.
Car loans
Auto loan rates are tied to several factors, including the Fed’s benchmark. Because financing costs remain elevated, new car buyers are taking on longer loans to keep their monthly payments manageable, according to the latest data from Edmunds.
Even so, with the rate on a five-year new car loan near 7%, the average monthly payment on a new car rose to $773 in the first quarter of 2026, an all-time high.
“Car buyers are in a tough spot right now because they’re getting squeezed from both ends: high sticker prices and high interest rates, with neither showing any signs of letting up,” said Joseph Yoon, consumer insights analyst at Edmunds.
“Until the rate picture shifts, buyers will keep stretching loan terms to make payments work, which only adds to the total cost of ownership down the road,” Yoon said.
Savings rates
While the Fed has no direct influence on deposit rates, the yields tend to be correlated with changes in the target federal funds rate. So, although rates on certificates of deposit and high-yield savings accounts have fallen from recent highs, they are holding above the annual rate of inflation.
For now, top-yielding online savings accounts and one-year CD rates pay around 4%, according to Bankrate.
“Yields on high-yield savings accounts and certificates of deposit are down from their peaks of a few years ago, but they’re still strong compared to what we’ve seen for most of the past decade,” Schulz said.
Milan Markovic | E+ | Getty Images
The average tax refund is 11.2% higher this season, compared with about the same period in 2025, according to the latest IRS filing data.
As of April 10, the average refund amount for individual filers was $3,397, up from $3,055 about one year ago, the IRS reported on Friday.
The IRS data reflects about 114 million individual returns received, out of about 164 million expected through Tax Day. Next week’s filing update is expected to include data through the April 15 deadline.
President Donald Trump‘s 2025 legislation, rebranded to the “working families tax cuts,” was a key talking point for Republicans on Tax Day.
With the November midterm elections approaching and Republicans defending slim majorities in Congress, many GOP lawmakers have highlighted Trump’s tax breaks and higher average refunds.
Meanwhile, affordability has been top of mind for many Americans amid rising costs of gas, electricity, food and other living expenses.
For filers who expected a refund this season, nearly one-quarter, or 23%, planned to use the funds to pay down credit card debt, and the same share said they would save the payment, according to the CNBC and SurveyMonkey Quarterly Money Survey, released in April. It polled 3,494 U.S. adults at the end of March.
Who benefited from Trump’s ‘big beautiful bill’
“It’s been a great tax season for the American people,” many of whom have benefited from Trump’s tax breaks, Treasury Secretary Scott Bessent said during a White House press briefing on Wednesday.
More than 53 million filers claimed at least one of Trump’s “signature new tax cuts” — the deductions for tip income, overtime earnings, seniors and auto loan interest — the Department of the Treasury also announced on Wednesday.
Those filers, who claimed the deductions on Schedule 1-A, have seen an average tax cut of over $800, according to the Treasury. Tax cuts can trigger a higher refund or reduce taxes owed, depending on the filer’s situation.
Some filers who itemize tax breaks have also seen benefits from the bigger federal deduction limit for state and local taxes, known as SALT. Trump’s legislation raised that cap to $40,000, up from $10,000, for 2025.
The latest SALT deduction limit change is expected to primarily benefit higher earners, according to a May 2025 analysis of various proposals from the Tax Foundation.
The Treasury has not released data on how many filers have claimed the SALT deduction during the 2026 filing season.
Traders work at the New York Stock Exchange on April 16, 2026.
NYSE
U.S. stocks climbed to record highs on Thursday against a backdrop of war, an oil supply shock and economic forecasts warning of stunted growth amid a protracted conflict.
Many investors may be thinking: Why?
Largely, it’s because the stock market is a barometer of what investors think will happen in the future, rather than an assessment of the present day, according to economists and market analysts.
Investors are essentially shrugging off the Middle East conflict as a blip that will be resolved relatively quickly, they said.
“The stock market isn’t trying to price what’s happening today,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank. “The stock market is always trying to price what the world is going to look like six to 12 months from now.”
Why stocks have been ‘resilient’
The S&P 500, a U.S. stock index, fell about 8% in the initial weeks of the Iran war, from the start of the conflict on Feb. 28 to a recent low on March 30.
But stocks have rebounded since then, erasing all losses since the beginning of the war. The S&P 500 closed at an all-time high on Thursday — about 11% higher than its nadir at the end of March. That followed a record close on Wednesday.
“The market has remained very resilient in the face of the war and has rallied strongly on the prospect that it will be resolved,” said Mark Zandi, chief economist at Moody’s.
A ship waits to pass through the Strait of Hormuz following the two-week temporary ceasefire between the US and Iran, which is conditional on the opening of the strait, in Oman on April 8, 2026.
Shady Alassar | Anadolu | Getty Images
And while investors cheered the possibility of a diplomatic off-ramp to the conflict, the temporary ceasefire has appeared tenuous, with the U.S. and Iran each accusing the other of breaking the agreement.
Nations haven’t been able to reach a peace deal ahead of the ceasefire’s end. Vice President JD Vance said U.S. officials left peace talks in Pakistan over the weekend after the Iranian delegation refused to agree to American demands not to develop a nuclear weapon.
The markets ‘have memory’
Ultimately, the stock market is signaling a collective belief that tensions will ratchet down, the war will end in the near term and oil flows through the Strait of Hormuz will normalize, economists said.
That’s largely because investors have been conditioned to believe that President Donald Trump will back off if the economic pain becomes too intense, economists said — the so-called “TACO” trade, shorthand for “Trump always chickens out.”
“Investors strongly believe — and have been conditioned to believe — he’s going to stand down, find a way to pivot, declare victory and move on,” Zandi said.
Trump has pushed back on the notion of backing down, framing his brinkmanship as a savvy negotiating tactic.
Economists pointed to a recent example of this dynamic: in April 2025 during so-called liberation day, when the Trump administration levied a host of tariffs on U.S. trading partners.
Within days — after the stock market had cratered more than 12% — Trump announced a 90-day pause on those tariffs. Stocks then saw one of their biggest daily rallies in history following Trump’s reversal.
Investors remember that Trump often de-escalates geopolitical shocks — which is why they’ve seized on positive headlines that hint at progress in peace talks, for example, Seydl said.
“The markets have memory,” Seydl said.
AI stocks and the ‘tech boom’
Traders celebrating at the New York Stock Exchange on April 15, 2026, as the S&P 500 closed above the 7,000 level for the first time.
NYSE
There are other factors underpinning market resilience during wartime, economists said.
One is the investors’ enthusiasm for artificial intelligence and technology stocks, which account for almost half of the S&P 500’s market capitalization, Zandi said.
“Those stocks run on their own dynamic independent of anything, including the war in Iran,” Zandi said. “I think we would have been down a lot more and it would have been harder for us to recover had it not been for the very, very optimistic perspectives on AI.”
We’re in the middle of a “tech boom” — and investors are likely to remain optimistic until they think the tech cycle has run its course, Seydl said.
More broadly, stock investors are essentially making a bet on the future earnings growth of a company — and the earnings backdrop has been “pretty solid,” Seydl said.
Consumer spending appears to be stable, for example, economists said. And companies are getting a boost to their after-tax earnings from the GOP’s so-called “big beautiful bill,” which, among other things, made it easier to write off investments upfront and therefore reduce their tax liability, Zandi said.
Going forward
Experts said there will be an economic hit from the Iran war, though.
“Despite the recent news of a temporary ceasefire, some damage is already done, and the downside risks remain elevated,” Pierre-Olivier Gourinchas, director of research at the International Monetary Fund, wrote Tuesday.
A protracted conflict risks deep and global economic pain, he wrote.
Even if the conflict is short-lived — as the broad market expects — stocks are unlikely to march much higher until it’s clear the U.S. is on the other side of the war and its economic fallout, Zandi said.
If investors are incorrect, and President Trump doesn’t back down or quickly extricate the U.S. from the war, the stock market may see a “full-blown correction” or worse, Zandi said. A stock market correction is a decline of at least 10% from recent highs.
“Everyone thinks they know what the script is,” Zandi said. “Now they just need to follow the script. If they don’t, the market will have some real problems.”
The uncertainty provides yet another example of why the average investor with a long time horizon should stick to their investment plan and ignore the noise, experts said.
“Trying to time the market is very difficult if not impossible for the average investor,” Seydl said. “It’s better to take a long-term perspective and ride out bouts of volatility.”
What that means for consumer loans
Checks and Balance newsletter: Of God and MAGA
Why software stocks, 2026’s market dogs, have joined the rally
Armanino adds Strategic Accounting Outsourced Solutions
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
