Wall Street’s Divide: Is Immigration Behind the US Hiring Slowdown?
In recent times, there has been a noticeable slowdown in job growth in the United States. This topic has raised some eyebrows among economists on Wall Street, with opinions divided over the reasons behind this decline. Some experts believe that reduced immigration is largely to blame, while others argue it’s more about a decrease in demand for labor. Understanding this divide is crucial since it can have significant implications for the economy moving forward.
The Crux of the Matter
The ongoing debate essentially revolves around two opposing viewpoints. On one side, some economists argue that the drop in hiring is primarily due to a shrinking workforce. This is partially the result of immigration policies introduced under the Trump administration. On the flip side, other economists claim that the slowdown stems from a weakening demand for labor instead. This distinction is vital, as it impacts decisions made by the Federal Reserve (the central bank of the United States) about interest rates.
When the shortage of available workers is a key issue, it is less likely that slowed hiring will lead to mass layoffs. In this case, the Fed can maintain higher interest rates without worrying too much. However, if declining labor demand is the real issue, then the Fed might need to step in and lower interest rates to stimulate the economy.
“Determining whether the slowdown is mainly due to immigration or a genuine drop in demand is the essential question at hand,” says Veronica Clark, an economist at Citigroup Inc. “While it’s true there are immigration-related effects, evidence also points to a weakening demand that isn’t linked to immigration, and that seems to be worsening.”
The Jobs Report Shock
The latest jobs report from the Bureau of Labor Statistics (BLS), released on August 1, surprised many in the financial markets with unexpectedly weak hiring figures for July. Additionally, the data showed significant downward revisions for the previous two months. This report was so alarming that President Trump dismissed the head of the BLS, unjustly claiming that the agency was rigging the numbers against him.
The report indicated that job growth had averaged only 35,000 over the last three months, signaling the slowest rate of growth since 2020. While the unemployment rate ticked up to 4.2%, which is the highest point since 2021, it wasn’t drastically different from its levels over the past year.
Following this disappointing news, analysts spent considerable time analyzing the report. Changes in trade and immigration policies implemented during the Trump administration have made it more challenging to interpret the labor market, which complicates the economic outlook.
Immigrant Impact on the Jobs Market
A substantial part of the discussion centers around the impact of immigration. Right before the release of the jobs report, Federal Reserve Chair Jerome Powell mentioned that the Fed would not be overly concerned about the hiring slowdown as long as the unemployment rate remained stable. Powell even hinted that the economy might only need to add zero jobs each month to keep the unemployment rate steady, considering the immigration situation.
This interpretation split Wall Street into two main groups. Some of the top economists—like those from Morgan Stanley, Barclays Plc, and Bank of America Corp.—claimed that reduced labor supply was the main driver behind hiring slowdowns. They anticipated that the Federal Reserve would keep interest rates high for the time being.
On the other hand, economists from firms like Goldman Sachs, Citigroup, and UBS interpreted the hiring slowdown as a sign of declining labor demand. They asserted that the Fed might need to consider lowering interest rates soon.
“We see little contradiction between slow employment growth and a low unemployment rate when the effects of immigration controls are taken into account,” wrote Morgan Stanley economists led by Michael Gapen in a report following the data release.
Analyzing the Data
Both groups of economists presented various statistics to back up their arguments, but no single piece of data definitively settled the debate.
The jobs report does contain insights about foreign and native-born workers. It recorded a decline of approximately a million foreign-born workers over the past three months. Administration officials seized this opportunity to promote their immigration policies, claiming it was a move to create jobs for American citizens.
However, many analysts believe that this drop in the labor force is not as straightforward as it appears. They noted that the numbers are influenced significantly by how the data is collected. For instance, a surprising rise in the native workforce seems implausible, leading to skepticism about the accuracy of these figures.
Where Do We Go From Here?
The ongoing debate about immigration and its effects on the job market remains unresolved. Analysts are urging a closer examination of sectors most dependent on immigrant labor to understand better how they are faring. For example, slow hiring in construction, manufacturing, and hospitality sectors—often reliant on immigrant workers—raises questions about labor supply.
Conversely, there are claims that sectors dependent on immigration are not lagging behind those affected by tariffs. As data continues to emerge, the labor force participation rate has decreased by 0.4%, marking its most significant drop in eight years, excluding the pandemic onset.
Both sides agree that the current job market situation is complicated. With inflation already a concern, the Federal Reserve has a challenging road ahead in deciding how to manage interest rates and what strategies to adopt.
In conclusion, the divide on Wall Street regarding immigration’s role in the slowing job growth in the U.S. reflects broader economic uncertainties. As information continues to develop, keeping an eye on these trends will be essential.
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Original Text – https://fortune.com/2025/08/09/immigration-crackdown-us-hiring-slowdown-labor-supply-vs-demand/