Why the jobs report may be headed for Alligator Alcatraz

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Quick Fix
The solid monthly job tallies that the White House has touted as a 'Trump effect' are expected to fade as the president's hard-line immigration policies chip away at the supply of foreign-born workers.
That could spell trouble for economic growth.
Policymakers and economists are coalescing around a belief that the labor market's breakeven rate — the total number of jobs that businesses must add to keep unemployment from rising — has cratered with the abrupt end of the Biden-era immigration surge. Even if the jobless rate stays near its current level of 4.2 percent, a slowdown in monthly payroll expansion would pose a risk.
'If the job market slows, then we should expect economic growth to follow,' said Daniel Zhao, the lead economist and senior manager at Glassdoor's economic research team.
The Labor Department will release its jobs report for June at 8:30 a.m. today.
President Donald Trump and top administration officials have long attributed the labor market's expansion under President Joe Biden to an unchecked flow of undocumented immigrants across the Southern border. Trump has made reversing that tide a centerpiece of his second term, ordering politically explosive Immigration and Customs Enforcement workplace raids and proposing billions in funding for new detention centers and border security. On Tuesday, he toured a Florida holding facility for undocumented immigrants dubbed 'Alligator Alcatraz.'
But while those efforts have deterred new arrivals, there's growing evidence that they've also dented a workforce pipeline that's been critical to U.S. employers. The average monthly employment gains reported by the Labor Department have slid since Trump's return to office, which has coincided with declines in both the size and share of the foreign-born workforce. Law enforcement encounters with migrants at the Southwest border — a statistic that's often used as a proxy for undocumented immigration levels — have plummeted.
Deutsche Bank economists told clients earlier this week that immigration declines could push the breakeven rate down to as low as 50,000 jobs per month. That estimate is in line with what Labor Department officials believe is necessary to keep the unemployment rate stable, and well below the massive nonfarm payroll totals that some economists assumed were necessary to keep pace with the expanding immigrant population under Biden.
But slower employment growth also implies that the economy can't expand as quickly without overheating. And the 'underlying demographics aren't favorable,' Aditya Bhave, a senior U.S. economist and managing director at Bank of America, told reporters on Tuesday. If immigration slows down, 'where are the people going to come from to do the jobs?'
Stephen Miran, Trump's top economist and the chair of his Council of Economic Advisers, told MM that there's an ample supply of native-born workers to pick up the slack. The unemployment rate for workers between the ages of 20 and 24 is north of 8 percent — roughly double the national average — and nearly 13.5 percent of working-age teenagers are unemployed. Major elements of the president's tax bill, including eliminating taxes on overtime, are intended to boost the supply of available labor, he added.
'It's a fallacy to think that we have no domestic substitute for immigrants,' Miran said. 'There's plenty of labor supply waiting to be brought in by the right incentives for firms to hire them — and for them to work — but they'll never come in if you just provide an infinite flood of non-Americans willing to work for slave wages.' (Miran specified that he had not yet seen the Labor Department's June report, which is typically provided to CEA chairs a day before publication.)
Miran acknowledged that uncertainty around the administration's policies could lead to'weaker numbers for a period of time,' but added that he 'would not see such weakness as indicative of a deep underlying problem in the economy.'
Nevertheless, economists have long cautioned that immigrant workers are critical to offsetting the effects of an aging domestic population. The American Enterprise Institute published research on Wednesday projecting that net migration to the U.S. could flatline — or decline — in 2025, which it said would shave 0.3 to 0.4 percentage points from gross domestic product.
And Trump himself noted recently that he's concerned about how the recent crackdown could affect farmers and hospitality businesses.
IT'S THURSDAY — Here's to barbecues and ballgames. And as always, send MM tips and pitches to me at [e-mail].
Driving the day
The Labor Department will release the June jobs report at 8:30 a.m. … The ISM Services Index will be released at 10 a.m. … The Securities and Exchange Commission has a closed meeting at 2 p.m. …
More from Miran — The CEA chair also offered this rejoinder to critics of his team's economic analysis of the 'big, beautiful bill,' which we covered in yesterday's edition of the newsletter. The analysis encapsulates several components of Trump's economic agenda in addition to the megabill, he said.
'A lot of folks who have criticized the paper and our work have done so [by] imputing every single benefit in the world to the tax bill. And that's not true,' he said. 'It's a misrepresentation to say that the numbers are all attributed to this or that, when — in fact — it's a recipe with a number of interlocking ingredients that form a coherent policy.'
Speaking of the bill — GOP House leaders were optimistic on Wednesday night that they'd secure the votes to send their megabill to Trump's desk, Meredith Lee Hill and Mike DeBonis reported on Wednesday evening. House Speaker Mike Johnson plowed ahead for a vote on the domestic policy megabill on Wednesday even despite threats from his members to vote down a key procedural measure.
By 10:00 p.m., his optimism was starting to look misplaced. Four GOP members — Reps. Andrew Clyde of Georgia, Victoria Spartz of Indiana, Brian Fitzpatrick of Pennsylvania and Keith Self of Texas — voted 'no' on a must-pass procedural vote, leaving Speaker Mike Johnson without the necessary votes to proceed. Johnson and other House GOP leaders worked the holdouts for hours, eventually securing adequate support to clear the hurdle around 3:30 a.m. The megabill is now expected to pass later this morning, per Mia McCarthy.
Fed File
Pulte v. Powell — Bill Pulte, the head of the Federal Housing Finance Agency, escalated his extremely online feud with Fed Chair Powell by pressing lawmakers to probe the central bank chief's alleged 'political bias' as well as his recent Senate testimony about the renovation of the Fed's headquarters, Declan Harty and Victoria Guida report.
A shadow chair to the shadow chair? — Powell has declined to say if he'll step down from the Fed board once his chairmanship concludes next year. That has complicated the president's search for a replacement. And Powell's 'circumspection has frustrated some of Trump's advisers, who are taking the silence as an attempt to push back against the president's desire for more influence on monetary policy,' r eport Bloomberg's Saleha Mohsin, Joshua Green and Amara Omeokwe.
Bowman's turn — Victoria reports that several top Fed staffers in charge of bank oversight are taking a voluntary deferred resignation offer, clearing the way for a new crop of aides under Vice Chair for Supervision Michelle Bowman.
At the regulators
Goldmine — Declan Harty reports that Securities and Exchange Commission Chair Paul Atkins said he does not believe putting stocks on the same blockchain technology that underpins cryptocurrency markets ignores investor-protection rules, calling the tokenization process 'an innovation.'
On The Hill
Crypto vote — Agriculture Chair G.T. Thompson (R-Pa.) expects the House will hold a vote on landmark cryptocurrency legislation during the week of July 14, Jasper Goodman reports.
Davidson on Ex-Im Bank — Rep. Warren Davidson tells Katherine Hapgood that the Export-Import Bank could play a bigger role during the second Trump administration. 'We should have the best export-finance operation in the world. And that doesn't mean that we do it the way the Chinese do it,' the Ohio Republican said. 'It means that we make American companies be able to compete against people. That is, particularly when you're competing against countries instead of companies.'
The Economy
Labor quality top small business issue in June — The National Federation of Independent Business's June jobs report found that 36 percent of small business owners reported job openings they could not fill, up 2 points from May. Job openings were the highest in construction, manufacturing and transportation industries, with 30 percent of small business owners surveyed continuing to have skilled labor openings, Katherine Hapgood reports.
Trade
Trouble? — From The WSJ's Gavin Bade and Brian Schwartz: 'Trump Said Trade Deals Would Come Easy. Japan Is Proving Him Wrong.'
Momentum? — Trump announced a preliminary trade deal with Vietnam that would attach a 20 percent tariff on all imports into the U.S., Phelim Kine, Megan Messerly, Daniel Desrochers and Ari Hawkins report. Goods routed to the U.S. through Vietnam from other countries would be subject to a 40 percent tariff.