America’s labor force is quietly shrinking — and it has nothing to do with retirement. As President Trump ramps up deportations and curbs legal immigration, economists warn the U.S. may soon face a labor crunch that hits small businesses, slows GDP growth, and drives up prices from farm stands to hotel front desks. If current trends hold, this could be the first year in recent memory that the U.S. experiences negative net migration and the economic fallout could be steep.
The forecast:
According to a new report from the conservative-leaning American Enterprise Institute, the U.S. could lose as many as 525,000 people to out-migration this year. That’s a sharp reversal from the 1.3 million net gain seen just last year. If those numbers bear out, we’re looking at the largest drop in immigration in decades. One driven not by war or disease, but by deliberate policy.
And this isn’t just a demographic shift. It’s an economic warning sign.
The economic ripple effect:
Foreign-born workers make up nearly one in five people in the U.S. labor force. Immigrants fill critical jobs in construction, agriculture, health care, hospitality, and home care, sectors that already struggle to attract American-born workers. Cut off that pipeline, and you don’t just lose workers. You raise costs, stunt growth, and put pressure on small businesses that can’t compete with big firms on wages.
The Dallas Federal Reserve estimates this drop in immigration could shave up to 1% off GDP growth this year. AEI and other economists agree: the U.S. economy, already slowed by an aging population and low birth rates, relies on immigration to maintain a healthy labor force.
What gets hit hardest:
- Supply side: Small businesses in agriculture, construction, and service industries may struggle to stay afloat.
- Demand side: Real estate, retail, and utilities sectors could feel the pinch as immigrant spending dries up.
- Consumers: Expect higher prices in sectors where labor shortages bite deepest.
And with $1.7 trillion in spending power, immigrants, documented or not, are also a major driver of local economies. Losing even a portion of that means lower business revenues, more layoffs, and more pressure on an already tight labor market.
The political divide:
The White House, for its part, is doubling down. Deputy Press Secretary Abigail Jackson defended the policy, framing it as a quality-of-life improvement for Americans. Trump’s base sees a win; economists see warning signs.
And those warning signs aren’t subtle. As UC Davis labor economist Giovanni Peri notes, “Large firms may be able to attract workers with higher wages. Smaller ones may not survive.” In other words: the immigration crackdown could supercharge consolidation — good for corporate giants, bad for mom-and-pop shops and rural economies.
Bottom line:
This isn’t just an immigration story. It’s a story about the long-term economic health of the country. Immigration has long served as a stabilizer for the U.S. workforce, helping counterbalance declining birth rates and an aging population. Curbing it may win political points, but it risks hollowing out key sectors of the economy and weakening the very communities these policies aim to protect.
The question isn’t whether the economic impact will be felt. It’s how long we’ll ignore it. Go beyond the headlines…
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