President Donald Trump’s sweeping crackdown on immigration during his second term, marked by increased deportations and tough new visa bans, has led to an 80% drop in net immigration to the United States, new analysis from Goldman Sachs shows. The report, released on February 16, warns that a sharp contraction in the flow of foreign-born workers is fundamentally changing the nation’s labor supply math and lowering the threshold for job growth needed to maintain economic stability.
The investment bank’s U.S. economics team forecast a sharp decline in the arrival of new workers in a report led by David Mericle. Goldman Sachs said that while net migration averaged about 1 million people a year in the 2010s, that number would fall to 500,000 by 2025 and is expected to plummet further to 200,000 by 2026. That’s an 80% drop from a historical baseline, a shift the report attributes directly to aggressive policy changes, including “increased deportations,” the recent announcement of a moratorium on immigrant visa processing for 75 countries, and expanded travel bans.
Economists noted that these measures could significantly “slow the inflow of visa and green card recipients,” while the “loss of temporary protected status for immigrants from certain countries” would pose further downside risks to labor supply. The report explicitly links the projected decline to increased deportations and tightening of visa and green card policies.
Tight restrictions on the labor pipeline are forcing economists to rebase the U.S. economy. Since less immigration means fewer new workers entering the labor market, the economy needs fewer new jobs to keep the unemployment rate stable. Goldman Sachs estimates that the “break-even rate” for job growth will fall to just 50,000 jobs per month by the end of 2026, from the current level of 70,000 jobs per month.
“Labor supply growth has fallen sharply as immigration recedes from its peak in late 2023,” Mericle’s team writes. So monthly jobs reports that looked weak in previous years may now signal stability. “All that is needed to keep job growth at a break-even pace is a modest pick-up,” the analysts wrote, suggesting that the shrinking labor supply is masking what might otherwise be seen as weak hiring demand.
These missing workers have sparked considerable debate and even anxiety in the economy, as reduced immigration, the “shrinking ice” of Trump’s tariff regime and the debate over whether artificial intelligence is a boom or a bubble add to the noise in economic data.
Increases in productivity from fewer workers have some, like the influential Erik Brynjolfsson of Stanford University, seeing a leap forward in AI tools, while others see a critical moment in which big businesses are preparing to do to white-collar workers in the 2020s what they did to blue-collar workers in the 1990s and lay off workers en masse. The Goldman Sachs study shows the economy is learning how to survive without the critical layer of immigrant labor that powered the previous regime. In fact, Merrick’s report is titled “Early Steps to Labor Market Stabilization.”
Other economists have recently predicted that the economy will be closer to the break-even point but will create fewer jobs, notably Michael Pearce of Oxford Economics. Last August, JPMorgan Asset Management strategist David Kelly predicted that “the number of workers will likely not grow at all” over the next five years due to changes in U.S. immigration and an aging native-born workforce.
The crackdown could also push the labor market into the shadows, Merrick found. The report suggests that “tighter immigration enforcement is forcing more immigrant workers to move to jobs outside official statistics,” which could distort federal data. The shift complicates the Fed’s ability to gauge the true health of the economy because official employment data may not reflect the full picture of employment activity.
This certainly explains why the overall unemployment rate seems to be holding steady around 4.3% (it recently fell to 4.28%), although Goldman Sachs says the labor market remains “unstable” due to these unpredictable factors. The report highlights “significant declines in technology employment,” although it clarifies that the sector accounts for a relatively small share of total employment. Even more worrying is the “continued decline in job vacancies,” which are below pre-pandemic levels, down to about 7 million.
In a separate report, Goldman Sachs chief economist Jan Hatzius maintained a 20% probability of a “moderate” recession over the next 12 months. The company expects the labor market to stabilize, with the unemployment rate rising only slightly to 4.5%. However, they warned that the risks “lean towards a worse outcome”, largely due to a weak starting point for labor requirements and the potential for “faster and more disruptive deployment of artificial intelligence”.
This story originally appeared on Fortune.com