Immigration Crackdown Shifts U.S. Labor Market Dynamics

Dallas Fed economists find the economy can shed jobs without lifting the jobless rate due to declining immigration.

Apr. 4, 2026 at 5:35pm

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According to a report from Dallas Fed economists, the breakeven rate of employment growth - the number of net new jobs needed each month to keep the unemployment rate steady - actually went negative during the summer and fall of 2025. This means the economy can shed jobs without increasing the jobless rate, signaling an overall balanced labor market despite a lack of net hiring. The economists attribute this shift to President Trump's immigration crackdown, which has led to a collapse in net immigration and a stagnation in the size of the U.S. labor force.

Why it matters

The Dallas Fed's findings carry major implications for the Federal Reserve's monetary policy decisions, as the central bank has traditionally relied on the unemployment rate as a key gauge of labor market health. With the breakeven rate for job growth now near zero, payroll gains that would have historically signaled economic slack are now consistent with a balanced labor market, potentially complicating the Fed's efforts to achieve maximum employment and price stability.

The details

Drawing on data in immigration court records and revised estimates of self-deportations, the Dallas Fed economists calculated that net unauthorized immigration was negative in the second half of 2025, averaging -55,000 per month. As a result, total net unauthorized immigration for 2025 reached -548,000, about 50% more than the Congressional Budget Office's latest projection. The economists found that incorporating these updated immigration estimates into their labor force model yields a substantially lower breakeven employment growth rate, which peaked at about 250,000 jobs per month in 2023, fell to roughly 10,000 by July 2025, and declined to near zero thereafter, averaging about -3,000 jobs per month from August to December 2025.

  • In the summer and fall of 2025, the breakeven rate of employment growth went negative.
  • Net unauthorized immigration was negative in the second half of 2025, averaging -55,000 per month.
  • Total net unauthorized immigration for 2025 reached -548,000, about 50% more than the Congressional Budget Office's latest projection.

The players

Dallas Fed

The Federal Reserve Bank of Dallas, one of the 12 regional Federal Reserve Banks in the United States.

President Donald Trump

The 45th President of the United States, who implemented strict immigration policies during his administration.

Jerome Powell

The current Chair of the Federal Reserve, who has pointed to the unemployment rate as a key gauge of the labor market.

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The takeaway

The Dallas Fed's findings suggest that the U.S. labor market has undergone a fundamental shift due to the Trump administration's immigration crackdown, with the economy now able to shed jobs without increasing the unemployment rate. This could complicate the Federal Reserve's efforts to achieve its dual mandate of maximum employment and price stability, as traditional economic indicators may no longer accurately reflect the health of the labor market.