July jobs report may show growing impact of Trump's immigration crackdown

USA Today

2 days ago

The Trump administration's immigration crackdown is taking a growing toll on a weakening labor market, economists say.
Forecasters surveyed by Bloomberg estimate the Labor Department on Friday, Aug. 1 will report the U.S. gained 109,000 jobs in July, down from 147,000 in June and a monthly average of 130,000 this year.
While business demand for workers is also flagging amid uncertainty over President Donald Trump's tariffs, a shrinking supply of job candidates is crimping payroll growth in industries with outsize shares of foreign-born workers, such as agriculture, construction, restaurants and food manufacturing.
After rising sharply since the pandemic, food manufacturing employment has been stagnant this year, Labor Department figures show. Construction payrolls were up 35,000 the first half of 2025, compared to 104,000 during the same period a year earlier.
"This crackdown is beginning to have a more marked impact on labor supply," Capital Economics wrote in a recent note to clients.
Why is the US labor force participation rate so low?
The U.S. labor force – which includes people working and looking for jobs – shrank by 130,000 in June and is down by 364,000 since January. The share of adults in the workforce dipped to 62.3% last month, the lowest since December 2022.
Other forces are also constricting the labor supply, most notably baby boomer retirements, said economist Dante DeAntonio of Moody's Analytics. But for now, he said, "The immigration story is by far the bigger story."
The number of migrants detained by Immigration and Customs Enforcement (ICE) has climbed from an average of 15,000 a month in 2024 to nearly 40,000 in early June, according to Capital Economics. And deportations have risen from an annualized rate of 400,000 early in the year to about 600,000 recently, Goldman Sachs said. Immigrants are also voluntarily leaving the country at a yearly rate of about 100,000, the research firm said.
Meanwhile, immigrants entered the country seeking asylum and for other humanitarian reasons at an annual rate of 300,000 in May and June, down from 1 million to 2 million last year, according to a Goldman report.
All told, the foreign-born labor force has contracted by more than 1 million people the last four months, Capital Economics said. In May, a record 5.4 million people who were working left the labor force altogether, Moody's said, citing Labor figures.
Arrests and deportations could have picked up further in July after the Supreme Court recently lifted a judge's order requiring that migrants first be given the chance to show they would be harmed if removed to countries other than their own, Capital Economics said.
'It's pretty dire'
Under Trump administration policies, many immigrants have lost their "temporary protected status," which allowed them to stay in the U.S. because of safety concerns in their home countries.
As a result, businesses are losing notable portions of their workforces, said Amy Peck, a lawyer at the Jackson Lewis law firm in Omaha, Nebraska. Many foreign-born workers toil in unskilled jobs such as dishwashing or moving parts across factor floors.
"Even at higher wages, some jobs are not attractive to American workers," she said.
Restaurants are coping by closing early or consolidating locations while manufacturers are eliminating shifts, Peck said.
"They're coming up with creative ways to deal with a reduced workforce," she said. "It's pretty dire."
How do immigrants contribute to the labor force?
The developments mark an extraordinary reversal. From 2019 to 2024, immigrants made up 88% of the nation's labor force growth, according to a report by the National Foundation for American Policy, a nonpartisan research organization. That relieved widespread pandemic-related worker shortages that fueled inflation.
Is immigration to the US declining?
But after averaging 2.6 million to 3.3 million from 2022 to 2024, net immigration to the U.S. – which includes people entering and leaving the country – has settled into a steady annual rate of 500,000, according to the the Congressional Budget Office and Goldman Sachs. That compares to about 900,000 before the pandemic.
Foreign-born people made up 19.1% of the labor force in June, down from 19.8% in March.
"It will be difficult or impossible for some companies in (affected) industries to replace lost workers," Moody's economist Marisa DiNatale wrote in a report. "This puts upward pressure on inflation as wages go higher and companies raise prices to afford the higher wage bills," she said.
Immigration-related worker shortages will likely cut the nation's potential annual economic growth from 2% to 1%, she added.
The trends have created a split-screen picture of America's job market. In industries such as construction, hospitality and agriculture, employers can't find workers because of the immigration restrictions.
In white-collar fields, workers can't find jobs as employers pull back hiring amid the broader economic uncertainty, DeAntonio said.
Taken together across the economy, the smaller pool of job seekers roughly has offset the softer demand, nudging down the unemployment rate from 4.2% to a historically low 4.1% in June.
A stable unemployment rate could keep the Fed from cutting interest rates this year despite flagging job growth, Capital Economics said.
DeAntonio, however, believes a significant drop-off in job gains will prompt the Fed to act even if unemployment holds steady.