US immigration slowdown under Trump drags on economy and productivity, Fed and Yale studies show
A sharp slowdown in U.S. population growth driven by President Trump's immigration crackdown is weighing on employment and productivity, according to new research from Federal Reserve economists and the Yale Budget Lab. Fed analysis found the breakeven rate for monthly job gains has dropped close to zero, while Yale projects the U.S. could have up to 4.6 million fewer working-age people by 2033 and economy-wide productivity 0.25% to 0.44% lower by 2052. The Congressional Budget Office projects potential labor-force growth to average less than half its 2025 pace over the next decade due to lower immigration.
President Trump's immigration crackdown is causing one of the sharpest slowdowns in U.S. population growth in decades, and new research from Federal Reserve economists and the Yale Budget Lab shows the drag is already weighing on employment and productivity.
Federal Reserve analysis earlier this year found that the breakeven rate for monthly job gains — the level needed to hold unemployment steady — had dropped close to zero as an immigration slowdown weighed on labor force growth. A new paper by Fed board economists examined state-level data and found that states with slower population growth saw more sluggish employment and more frequent job losses relative to states with faster population upswings.
The Fed economists wrote: "Importantly, this analysis does not conclude that the current labor market is on solid footing, rather just that low population growth and near-zero employment growth are not by themselves necessarily indicative of weakness." They added that the current shift in population growth has been triggered by immigration shifts "which have limited parallels in other advanced economies."
The Congressional Budget Office projects potential labor-force growth to slow over the next decade, averaging less than half its 2025 pace as lower immigration weighs on workforce growth.
New research from the Yale Budget Lab shows the U.S. could have as many as 4.6 million fewer working-age people by 2033 due to a temporary immigration slowdown. The paper estimates economy-wide productivity could be lower by between 0.25% and 0.44% by 2052, depending on the severity of the immigration reduction — a result of downward pressure on new business creation.
"At a time when policymakers are hoping for a boom from increased productivity growth, decreased immigration undermines that goal by removing entrepreneurs (and their children) who would have started new businesses," Abhi Gupta, an economist at Yale Budget Lab and author of the research, said in an email. "Fewer immigrants today leaves a demographic echo lasting decades, leading to persistently fewer entrepreneurs and a less dynamic economy," Gupta added.