Drop in unauthorized immigration slows job growth, SF Fed paper finds

• U.S. job additions dropped dramatically to only 181,000 in 2025 from 1.459 million in 2024, with economists linking the decline to sharply reduced immigration flows
• Construction sector showed the most notable impact, with falling unauthorized immigrant worker flows potentially slowing residential construction and housing supply growth
• Fed economists warn that employment growth will likely face continued downward pressure as long as declines in unauthorized immigrant worker flows persist

Summary: Drop in Unauthorized Immigration Slows U.S. Job Growth

Key Findings:

A San Francisco Federal Reserve study published Tuesday reveals that declining unauthorized immigration has significantly slowed U.S. employment growth, particularly in construction and manufacturing sectors. The research analyzed immigration trends from 2021 through March 2024, establishing a direct correlation between unauthorized immigrant worker flows and local job market performance.

Critical Data Points:

• U.S. economy added only 181,000 jobs in 2025, compared to 1.459 million jobs in 2024—representing an 87% decline
• Unauthorized immigration surged beginning in 2021, then declined sharply starting March 2024
• Job growth patterns tracked immigration trends in lockstep across local markets

Sector Impact:

Construction and manufacturing experienced the most significant slowdowns. Fed economists Daniel Wilson and Xiaoqing Zhou noted that construction sector effects are "particularly notable," suggesting falling unauthorized immigrant worker flows could impede residential construction and constrain housing supply growth.

Market Implications:

The research has important ramifications for:

• Labor market outlook: Continued downward pressure on employment growth expected as long as immigration declines persist
• Housing affordability: Reduced construction workforce may slow housing supply expansion, potentially affecting affordability negatively
• Policy debate: Findings contrast with Trump administration claims that reduced immigration will benefit American workers and improve housing affordability by lowering demand

Political Context:

The study arrives during President Trump's second term amid ongoing immigration crackdowns. While the administration argues restrictions will help domestic workers and housing markets, the Fed research suggests reduced immigration may create economic headwinds through constrained labor supply and slower construction activity.