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Drop in Immigration Could Slow U.S. Economic Growth, New Report Finds

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A new report from the Federal Reserve Bank of Dallas warns that a sharp decline in immigration could have negative consequences for the U.S. economy in the coming years. While there was a surge in unauthorized immigration from 2021 to 2024, the report shows a steep drop beginning mid-2024, with potentially significant effects on labor force participation and economic growth through 2027.

The shift began in June 2024, when the Biden administration implemented new restrictions on migrants’ ability to request asylum at the border. By March 2025, net unauthorized immigration had fallen by 82 percent, from 105,000 to 19,000 per month, according to the report. Pia Orrenius, vice president of research at the Dallas Fed and co-author of the study, noted that while immigrants were still entering the labor force at the start of 2025, the overall trend has reversed, as reported by KERA News.

The Congressional Budget Office estimated that between 2021 and 2024, about 7.3 million “other foreign nationals”, including unauthorized immigrants and those with quasi-legal status, joined the U.S. population, far surpassing the pre-pandemic average of roughly 100,000 annually. However, that momentum is now slowing. Orrenius pointed to policies such as ending Temporary Protected Status (TPS), reducing humanitarian parole, and not renewing or issuing work permits as contributing factors.

According to the report, the current political climate could further suppress labor growth. President Donald Trump, who has prioritized immigration enforcement in his campaign for a second term, has implemented policies that Orrenius said may be deterring immigrants from participating in the economy. 

“There could be chilling effects where people actually don’t leave, they don’t self-deport, or they aren’t deported, but are less likely to leave their home, less likely to go to church, less likely to go to school, and less likely spend money,” she said, according to KERA News.

The economic effects go beyond labor supply. Co-author Xiaoqing Zhou, assistant vice president of research at the Dallas Fed, emphasized that a decline in immigration also reduces consumer demand. “When you have less immigrants, it has spillover effects on non-immigrant workers,” Zhou stated, underscoring the broad impact on the U.S. economy.

RA Staff

Written by RA News staff.

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