How Trump's megabill could slam the job market
The foreign-born workforce contracted in June, marking the third straight month it has fallen. The tax bill contains billions more in funds for border control.
The robust job gains the White House has credited to the “Trump effect” may be at risk of stalling as the administration's aggressive immigration policies begin to reduce the number of foreign-born workers available to employers.
This concern has grown in light of the GOP’s proposed $150 billion border security and deportation initiative, known as the “Big, Beautiful Bill.” The foreign-born segment of the U.S. workforce has now declined for three consecutive months, according to government data released Thursday — even as overall job growth surprised economists by rising by 147,000 in June.
White House officials argue that the drop in immigrant labor won’t hurt economic performance, claiming the new legislation will encourage more native-born Americans to join the workforce. However, many economists are skeptical, warning that tightening immigration could weaken an already slowing labor market.
As deportations ramp up and immigration slows, the true impact of these policies on employment and economic growth is coming into focus.
Economists estimate that the labor market’s breakeven point — the number of jobs needed each month just to keep unemployment stable — is likely falling due to the sharp decline in immigration seen since Biden’s tenure. Even if the unemployment rate remains near its current 4.1%, slower job creation could become a drag on the broader economy, they caution. Federal Reserve Chair Jerome Powell recently echoed this sentiment, noting that slower growth may already be underway.
“If the job market cools, we should expect the economy to slow down too,” said Daniel Zhao, senior economist at Glassdoor.
President Trump and his top aides have blamed much of Biden’s labor market expansion on increased undocumented immigration across the southern border. Reversing that trend has become a central pillar of Trump’s second-term agenda, including ICE workplace raids, expanded detention facilities, and enhanced border enforcement. This week, Trump visited a Florida facility holding undocumented immigrants, jokingly referred to as “Alligator Alcatraz.”
“We need more agents to arrest them, more beds to hold them, and more transportation contracts to send them back,” said Tom Homan, Trump’s border czar.
So far, the labor market has remained strong despite these immigration restrictions. But early signs suggest that the supply of immigrant labor — crucial for many industries — is beginning to shrink. Since Trump took office again, both the total number and share of foreign-born workers in the U.S. have fallen. Border encounters at the Southwest border, often used as a proxy for illegal immigration levels, have also dropped sharply.
Stephen Miran, chair of Trump’s Council of Economic Advisers, disputes concerns about labor shortages, arguing there’s a large pool of underutilized American workers ready to fill open positions. He pointed to elevated unemployment rates among younger workers — over 8% for those aged 20–24 and more than 14% for working-age teens — as evidence that domestic labor can replace immigrant labor with the right incentives.
Miran also highlighted elements of the administration’s tax plan, such as eliminating taxes on overtime pay, which he said would help bring more people into the workforce. Additionally, he argued that Medicaid recipients might return to work if policy changes pushed them to seek employment.
“It’s a myth that we have no domestic alternative to immigrant labor,” Miran said. “There’s plenty of untapped labor supply. It just needs the right incentives for both employers and workers.”
Still, Deutsche Bank analysts warned this week that declining immigration could lower the labor market’s breakeven point to around 50,000 new jobs per month — far below the high payroll numbers seen during Biden’s immigration surge. That aligns with Labor Department estimates for maintaining stable unemployment but falls short of what many economists believe is necessary to sustain strong economic growth.
A weaker labor market also limits how fast the economy can grow without triggering inflationary pressures. “Demographics aren’t on our side,” said Aditya Bhave, senior U.S. economist at Bank of America. “If immigration dries up, where will the workers come from?”
While Miran acknowledged that uncertainty around the administration’s policies could temporarily dampen job growth, he insisted such weakness wouldn’t signal deeper economic problems.
Nonetheless, many experts say immigrant labor plays a vital role in offsetting the challenges posed by an aging U.S. population. Although youth employment improved during Trump’s first term, it remains uncertain whether those gains will be enough to compensate for a potential long-term drop in net migration.
The Congressional Budget Office projects that population growth will slow in the decades ahead. A 2024 CBO report found that the post-pandemic increase in immigration boosted economic output — though it slightly reduced average wage growth and had little effect on inflation.
Research released this week by the American Enterprise Institute predicted that net migration could fall or even turn negative in 2025, potentially reducing GDP growth by 0.3 to 0.4 percentage points. Trump himself has expressed concern about how the crackdown could affect industries like farming and hospitality, which rely heavily on immigrant labor.
Federal Reserve Chair Powell has also flagged immigration-driven labor declines as a threat to future economic expansion.
“When you significantly slow the growth of the labor force, you slow the growth of the economy,” Powell told Congress last month. “It’s not our role to take a stance on immigration policy. But yes, growth is slowing —and that’s one reason why.”