Shifting Immigration Policies Distort Labor Force Participation Rate

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The labor force participation rate has been declining over the past year, but a new analysis suggests this is largely an illusion caused by flaws in how the statistic is calculated. Significant changes in immigration and border policies under the Biden and Trump administrations have led to large swings in net migration that the Census Bureau has struggled to keep up with in its population estimates. As a result, the denominator used to calculate the participation rate has been inaccurate, making the metric an unreliable indicator of actual labor market conditions.

Why it matters

The participation rate is a closely watched economic indicator, but this analysis shows it has become distorted by demographic shifts that have outpaced the government's ability to accurately measure the population. Policymakers and economists need to be cautious about drawing conclusions from the participation rate during periods of rapid immigration changes, as it may not reflect the true state of the labor market.

The details

The participation rate is calculated by dividing the labor force by the civilian noninstitutional population. While the labor force data comes from a monthly household survey, the population figure is based on annual Census Bureau estimates. During the Biden administration, the Census Bureau significantly underestimated net international migration, leading to a population denominator that was too low. This made the participation rate appear higher than it should have been. Now, under the Trump administration's tighter immigration policies, the opposite is likely true - the population denominator may be too high, depressing the participation rate and making the labor market look weaker than it really is.

• In January 2025, the participation rate stood at 62.6 percent.
• By March 2025, it had ticked down to 62.5 percent.
• By December 2025, it was 62.4 percent.
• In January 2026, after the Census population update, it was revised down to 62.1 percent.
• In February 2026, it fell to 62.0 percent, and in March 2026 it reached 61.9 percent.

What’s next

Economists and policymakers will need to closely monitor the Census Bureau's population estimates and revisions to better understand the true state of the labor market, as the participation rate has become an unreliable metric during this period of rapid immigration policy shifts.