White House officials insist that the decline won’t dent the economy because the megabill will encourage more Americans to enter the workforce.
Many economists disagree, predicting that the immigration crackdown will hurt the labor market.
Federal Reserve Chair Jerome Powell is among those recently warning that economic growth could diminish.
“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 unemployment rate for workers between the ages of 20 and 24 is north of 8 percent — roughly double the national average — and more than 14 percent of working-age teenagers are unemployed.
According to White House officials, the megabill will encourage more Americans to enter the workforce, so the decline won’t negatively impact the economy. The labor market will suffer as a result of the immigration crackdown, according to many economists who disagree.
We will soon learn who is correct as the economic data begins to reflect President Donald Trump’s deportations.
Economists predict that the sudden collapse of the Biden-era immigration boom will result in a drop in the labor market’s breakeven rate, or the number of jobs that companies need to create to control unemployment. They claim that a slowdown in payroll growth would be problematic for the economy even if the unemployment rate remained close to its current level of 4 percent. Jerome Powell, the chair of the Federal Reserve, has been warning that economic growth may slow down.
Daniel Zhao, senior manager and lead economist at Glassdoor’s economic research team, stated that “economic growth should follow if the job market slows.”.
Under President Joe Biden, Trump and senior administration officials blame the growth of the labor market on an unrestrained influx of undocumented immigrants from the South. With plans for new detention facilities, increased border control, and politically explosive workplace raids by Immigration and Customs Enforcement, Trump has made turning that tide a key priority of his second term. He visited “Alligator Alcatraz,” a detention center for undocumented immigrants in Florida, on Tuesday. “.”.
To arrest them, we require additional agents. For them, we require additional beds. Earlier this week, Tom Homan, Trump’s border czar, stated, “And we need more transportation contracts to move them out of the country.”. “This bill will increase our resources so that we can continue the fantastic work that the Trump administration is doing. “”.
The labor market has not yet been weakened by those immigration policies. Nonetheless, there are indications that a labor pipeline has been vital to U.S. S. Employers are beginning to wane. Both the number and percentage of foreign-born workers have decreased since Trump took office again. The number of encounters between law enforcement and migrants at the Southwest border, which is frequently used as a stand-in for the amount of undocumented immigration, has significantly decreased.
Trump’s top economist and the head of his Council of Economic Advisers, Stephen Miran, disagrees with the consensus, stating in an interview that there are plenty of native-born workers to make up the difference. Over 14 percent of working-age teenagers are unemployed, and the unemployment rate for workers between the ages of 20 and 24 is over 8 percent, which is about twice the national average.
According to Miran, the president’s tax bill includes significant provisions aimed at increasing the supply of available labor, such as the removal of overtime taxes. Additionally, if the law encourages unemployed or underemployed Medicaid recipients to return to the workforce, the labor pool may benefit as well.
Miran stated, “It is a mistake to believe that we have no domestic alternative to immigrants.”. “If you simply offer an endless stream of non-Americans willing to work for slave wages, they will never come in. There is a large labor pool waiting to be brought in by the right incentives for firms to hire them — and for them to work!”. “”.
Deutsche Bank economists warned clients this week, however, that the breakeven rate may drop to as low as 50,000 jobs per month due to declining immigration. That estimate falls well short of the enormous nonfarm payroll totals that some economists believed were required to keep up with the growing immigrant population under Biden, and it is consistent with what Labor Department officials believe is required to prevent the unemployment rate from rising.
Additionally, slower employment growth suggests that the economy cannot grow faster without overheating. Additionally, the “underlying demographics aren’t favorable,” according to senior U.S. A. Bank of America’s managing director and economist told reporters on Tuesday. In the event that immigration declines, “where are the people going to come from to do the jobs?”.
Miran admitted that “weaker numbers for a period of time” could result from uncertainty surrounding the administration’s policies. However, the CEA chair stated that he “would not see such weakness as indicative of a deep underlying problem in the economy.”. “.”.
However, many economists believe that the effects of an aging domestic population must be counterbalanced by immigrant workers. It’s unclear if Trump’s first term’s improvements in younger adult unemployment and labor force participation would be sufficient to address the demographic issues that are anticipated to emerge if net migration slows to a trickle.
In the upcoming decades, the Congressional Budget Office predicts that population growth will slow. According to the nonpartisan federal agency’s separate 2024 analysis, the post-pandemic spike in immigration would boost economic output, albeit at the expense of slower average wage growth, while keeping inflation essentially unchanged.
Research released Wednesday by the conservative American Enterprise Institute predicted that net migration to the U.S. A. might flatline, or fall, in 2025, which would trim the GDP by 0.3 to 0.4 percentage points, according to the assessment. Furthermore, Trump recently expressed concern about the potential effects of the recent crackdown on farmers and hospitality enterprises.
Future growth may be hampered by labor force declines linked to immigration, according to Fed chief Powell.
The Fed Chair told lawmakers last month that “if you drastically slow the growth of the labor force, you will slow the growth of the economy.”.
He went on to say, “It is not for us to have an opinion on immigration policy.”. One of the reasons is that growth will slow, and it is slowing. “”.
