According to a new analysis by Goldman Sachs, a comprehensive immigration enforcement initiative during President Donald Trump’s second term—marked by heightened deportations and rigorous new visa prohibitions—has triggered an 80% reduction in net immigration to the U.S. The report, issued on Feb. 16, cautions that this significant contraction in the influx of foreign-born labor is fundamentally reshaping the calculations regarding the nation’s labor supply and reducing the level of job creation required to preserve economic stability.
The investment bank’s U.S. economics team, in a report authored by David Mericle, forecast a sharp decline in the arrival of new personnel. Although net immigration averaged roughly 1 million individuals annually throughout the 2010s, that number decreased to 500,000 in 2025 and is expected to fall further to merely 200,000 in 2026, Goldman stated. This signifies an 80% drop from the historical average, a change the report ascribes directly to forceful policy adjustments, including “increased deportations,” a newly declared halt to immigrant visa processing for 75 nations, and a broadened travel ban.
The economists observe that these actions are likely to significantly “decelerate inflows of visa and green card recipients,” while the “revocation of Temporary Protected Status for immigrants from certain nations” presents additional downside hazards to the labor supply. The report directly connects the anticipated decrease to increased deportations and more stringent visa and green card regulations.
Recalibrating the ‘break-even’ point
This intense limitation of the labor pipeline is compelling economists to adjust their benchmarks for the U.S. economy. Since reduced immigration translates to fewer new workers joining the workforce, the economy needs fewer new positions to keep the unemployment rate steady. Goldman Sachs calculates that this “break-even rate” of job creation will decline from its present mark of 70,000 jobs per month to just 50,000 by the close of 2026.
“Labor supply growth has dropped sharply as immigration has receded from the high point seen in late 2023,” Mericle’s team noted. As a result, a monthly employment report that might have appeared feeble in prior years could now indicate stability. “A slight increase is all that should be required to maintain job growth at the break-even tempo,” the analysts stated, implying that the diminished worker supply is concealing what might otherwise be perceived as lethargic hiring demand.
These absent workers have sparked significant debate—and even apprehension—within economic circles, as diminished immigration adds further volatility to economic data, alongside the “shrinking ice cube” of Trump’s tariff structure and the discussion over whether artificial intelligence is a boom or a bubble.
The rising productivity derived from a smaller workforce leads some, like Stanford’s prominent Erik Brynjolfsson, to identify a surge driven by AI tools, while others perceive a critical juncture where Big Business is preparing to replicate in the 2020s the mass downsizing of blue-collar workers that occurred in the 1990s, this time targeting white-collar employees. This Goldman research implies the economy is adapting to operate without the essential segment of immigrant labor that powered the previous administration. Indeed, Mericle’s report was titled, “Early steps toward labor market stabilization.”
Other economists have recently forecast that the economy is approaching a break-even threshold while generating fewer jobs, notably . Last August, J.P. Morgan Asset Management strategist David Kelly predicted there could very possibly be “” over the coming five years due to shifts in U.S. immigration and the aging of the domestic-born workforce.
Underground workforce and economic hazards
The enforcement crackdown may also be driving the labor market underground, Mericle discovered. The report indicates that “stricter immigration enforcement compels more immigrant workers to transition to roles that lie outside official statistics,” potentially distorting federal data. This transition hinders the Federal Reserve’s capacity to assess the genuine condition of the economy, as official payroll figures might not not reflect the complete scope of employment activity.
This likely accounts for why the headline unemployment rate seems to be stabilizing near 4.3% (it recently decreased to 4.28%), though Goldman noted the labor market remains “unsteady” due to these erratic variables. The report underscores a “significant drop in tech employment,” though it notes the sector represents a comparatively minor portion of total payrolls. More troubling is the “ongoing decline in job openings,” which have dropped beneath pre-pandemic levels to approximately 7 million.
In a separate memo, Goldman chief economist Jan Hatzius sustained a “moderate” recession likelihood of 20% for the upcoming 12 months. The firm anticipates the labor market to stabilize, forecasting the unemployment rate to climb only marginally to 4.5%. Nevertheless, they cautioned, risks are “skewed toward a poorer result,” primarily due to the fragile starting point for labor demand and the possibility of “more rapid and disruptive implementation of artificial intelligence.”