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Immigration has long been a critical driver of the U.S. economy, providing labor, innovation, and demographic growth. Over the past three years, immigration numbers have surged, fueling…
Archive edition · Market data and company circumstances reflect 22 March 2025, when this newsletter was sent.
Immigration has long been a critical driver of the U.S. economy, providing labor, innovation, and demographic growth. Over the past three years, immigration numbers have surged, fueling economic expansion, stabilizing labor markets, and filling key roles across industries. However, as 2025 progresses, a significant decline in immigration is expected, potentially reshaping the economic landscape.
According to Goldman Sachs, net immigration is projected to slow to approximately 750,000 individuals per year. While this decline remains only moderately below pre-pandemic levels, it marks a notable shift from the heightened influx seen recently. The broader economic impact of this shift will depend largely on the policy decisions made by the current and future administrations.
The US economy thrives on a steady inflow of workers and consumers. Immigration contributes significantly to workforce expansion, entrepreneurship, and demographic stability, preventing the kind of stagnation seen in aging populations like Japan and certain European nations. But with a projected slowdown in immigration, economic growth may also see a mild deceleration.
Goldman Sachs estimates that the slower pace of immigration will contribute 30-40 basis points less to potential GDP growth compared to the elevated levels of 2023-2024.
However, relative to pre-pandemic immigration levels, this reduction is just about 5 basis points—a much smaller impact. While this suggests that the overall effect on economic expansion may be limited, there are nuances to consider:
The US labor market has been undergoing a significant transformation post-pandemic, with high demand for workers in certain sectors and automation reshaping traditional job roles. With immigration slowing, what will this mean for wages, unemployment, and industry-specific labor shortages?
The effects on wage growth and inflation should be modest since the labor market has largely returned to balance. The unemployment rate currently stands at 4%, and labor demand remains robust, with historically low layoff rates and high job openings.
However, the following trends may emerge:
With these factors in mind, businesses must adapt to potential labor shortages by investing in automation, workforce training, and alternative hiring strategies.
While the overall impact of declining immigration may be muted at the macroeconomic level, certain industries are particularly vulnerable. Immigrants—both legal and unauthorized—make up a substantial portion of the workforce in agriculture, food processing, and construction. Here’s how each sector may be affected:
The agricultural sector has historically relied on seasonal and migrant workers to meet labor demands, particularly in states like California, Texas, and Florida. Immigrants make up about 15%-20% of the workforce in crop production and food processing. A decline in available labor could lead to:
The construction industry is another major employer of immigrant workers, particularly in roles requiring physical labor. Reduced immigration could result in:
Hotels, restaurants, and cleaning services have traditionally relied on immigrant labor. With fewer workers available, businesses in these sectors may:
The degree to which immigration declines—and its economic impact—will depend largely on policy decisions. The Biden administration has already implemented increased border security and moderate deportation measures, but a potential Trump administration could take even stricter action.
This article preserves the analysis in our weekly newsletter sent 22 March 2025. Market prices, forecasts and company circumstances reflect the time of publication and may have changed.
This material is general information, not personal financial advice or a recommendation to trade. Investing and trading involve risk, including loss of capital.