On June 14, U.S. President Donald Trump celebrated his 79th birthday. Behind bulletproof glass, he presided over a grand military parade. At the same time, protests erupted across the United States, with approximately 2,000 demonstrators joining the “No Kings” marches, denouncing Trump’s continued expansion of executive power. In Palm Beach, Florida, a popular southern resort town, over 3,000 protesters braved the heat and marched close to Trump’s Mar-a-Lago estate.
Trump’s immigration policies have triggered escalating domestic protests and unrest. In late May, Stephen Miller, the architect of Trump’s immigration agenda and Deputy White House Chief of Staff, raised the daily deportation target for undocumented immigrants to 3,000. In order to meet this quota, even long-term immigrants with no criminal record—many of whom have lived and worked in the U.S. for two or three decades—have been deported. Raids have taken place at high-traffic locations such as Home Depot and 7-Eleven, leaving immigrants in Los Angeles fearful to live and work normally.
Alaric noted that Trump’s immigration policy could result in net negative immigration for the U.S. in 2025—the first such occurrence in half a century. Compared to the net inflow of three million immigrants in 2024, this marks a dramatic reversal and is already having profound effects on the U.S. labor market supply.
What are the implications of net negative immigration?
Immigration has long served as a vital supplement to the U.S. labor force—especially in the immediate aftermath of the pandemic when the lifting of social distancing measures created severe labor shortages.
Since January 2021, crossings at the U.S. southern border surged, a trend that continued into the first half of 2024.
This wave of immigration was driven by multiple factors: aggressive post-pandemic fiscal stimulus, an overheating economy, a tight labor market, and rapid wage growth. Data from the U.S. Department of Labor show that job openings surged from 7.2 million in January 2021 to a peak of over 12 million in March 2022.
Immigrants are heavily represented in so-called “3D” jobs—dirty, difficult, and dangerous—such as agriculture, hospitality, and food processing. However, with Trump’s immigration policies in full effect, the inflow of immigrants has plunged, and the impacts are now being felt across multiple sectors.
On Friday, June 13, The New York Times reported that Trump had made a 180-degree policy reversal under the internal code name “TACO.” Specifically, Trump has ordered Immigration and Customs Enforcement (ICE) to suspend workplace raids targeting undocumented immigrants in agriculture, hospitality, and restaurant sectors. Reportedly, Agriculture Secretary Brooke Leslie Rollins persuaded Trump by highlighting that farm owners were unable to hire enough workers due to immigrants’ fear of being arrested and deported on the job.
Beyond low-skilled workers, high-skilled immigrants—particularly those on H-1B visas working in the tech industry—may also face risks. In January 2025, Tesla CEO Elon Musk and former Trump adviser Steve Bannon clashed over whether to tighten H-1B visa policies. These skilled immigrants not only fill gaps in the labor force but also generate significant tax revenue through their high incomes.
Tightening immigration complicates Fed’s rate-cut path
The drastic shift in immigration policy has reshaped the supply-demand dynamics in the U.S. labor market. Despite signs of a weakening economy, key indicators that the Federal Reserve closely monitors—such as the unemployment rate—remain surprisingly resilient.
On June 4, the ADP private employment report came in well below expectations, fueling market hopes for a Fed rate cut. However, two days later, the nonfarm payroll report showed that while job creation in May declined slightly to 139,000, the unemployment rate held steady at 4.2%. Meanwhile, April’s job openings edged up to 7.4 million—still above pre-pandemic highs—making it hard to argue that the labor market is deteriorating.
One plausible explanation for the contradictory labor data is that the decline in labor supply has outpaced the slowdown in hiring demand. Fewer new jobs might reflect not only weaker employer demand but also a shrinking labor pool that makes hiring more difficult.
Several months of cooling inflation had already fueled market expectations of rate cuts. However, the Fed is now increasingly concerned that reduced labor supply could reignite inflationary pressures. Alaric noted that since the second half of 2024, slowing immigration inflows have tightened labor supply and may push up inflation in agriculture, construction, and hospitality sectors by the end of 2025. Still, she emphasized that there is no clear evidence yet that this reduced labor supply is translating into wage increases.