Will stopping immigration cause labor shortages?

Yes — evidence from 2025-2026 shows immigration restrictions have caused real labor shortages in specific sectors, though the broader economic picture is more nuanced.

Sector-specific shortages are documented

Construction: New data has confirmed economists' concern that the Trump administration's immigration crackdown has led to fewer jobs in critical industries, particularly construction. In one striking example, half of a construction crew's workers stopped showing up to a site after an Immigration and Customs Enforcement raid on another site 230 miles away, afraid of facing the risk of deportation. Industry data shows nearly 40% of skilled construction workers are now over age 45, and apprenticeship programs typically require five to seven years to produce fully skilled workers, leaving a growing gap — meaning immigration cuts compound an existing structural shortage. The National Association of Home Builders reports that immigrants make up 34% of all construction workers.

Agriculture: The agricultural industry could suffer as the crackdown continues, since 68% of farm laborers for fiscal year 2021–22 were foreign-born, and the Labor Department warned in October 2025 that immigration policies risk creating a labor shortage in the sector.

Manufacturing: Workers at factories in Michigan and Kentucky say immigration crackdowns are driving labor shortages — at a GE Appliances plant in Louisville, over 125 employees lost their jobs due to canceled work permits, causing slowdowns, while a Kraft Heinz facility required extended overtime as remaining staff struggled to meet demand.

Aggregate labor force data confirms decline

The size of the foreign-born labor force has declined by about 1.2 million people since January, to 32.1 million total people by July. A separate analysis found this decline represents a reduction of more than 1.4 million foreign-born workers compared to labor force growth expected in government estimates, versus the roughly 1.3 million more foreign-born workers assumed by the CBO and Social Security Administration.

Longer-term projections are more severe: a study found Trump administration policies on legal and illegal immigration would reduce the projected number of workers by 6.8 million by 2028 and 15.7 million by 2035, with people entering the workforce not fully making up for job losses.

But it's not a simple story — several complicating factors

1. U.S.-born workers aren't filling the gap. Despite fewer immigrant workers, the labor force participation rate for U.S.-born workers aged 16 and older actually ticked lower to 61.6% from 61.7% the prior year rather than rising to absorb the slack.

2. Complementary jobs disappear too. Immigrants fulfill a complementary role in the workplace — their jobs necessitate support roles more likely held by U.S.-born workers. For example, at a construction site, fewer laborers means fewer electricians and managers needed on site. This means immigration cuts can reduce jobs for native-born workers too, not just create vacancies for them.

3. Reduced demand offsets some shortage effects. Removing immigrant workers also removed consumer spending, which economists say offset much of the expected labor shortage effect. Wage data reflects this: hourly earnings in 41 immigrant-reliant industries rose just 3.5% year-over-year in February, below the 3.8% increase for all workers — the opposite of what a true shortage would predict (wages should rise faster where labor is scarce).

4. Some economists argue effects are modest overall. Goldman Sachs Research concluded the impact from reduced immigration on wage growth and inflation should be modest now that the US labor market is back in balance, and estimated the slower pace of immigration would contribute 30-40 basis points less to potential GDP growth than the 2023-2024 pace, but just 5 basis points less than the pre-pandemic pace.

5. Macro data is mixed. The Dallas Fed found that the breakeven rate of employment growth actually went negative during summer/fall 2025, meaning the economy can shed jobs without increasing the jobless rate — suggesting the overall labor market absorbed reduced immigration without major disruption, even as specific sectors struggled.

Bottom line

The honest answer is it depends on the sector and timeframe. Labor-intensive industries with high shares of foreign-born workers — construction, agriculture, meatpacking, hospitality — are experiencing genuine, well-documented shortages with real economic costs (project delays, lost output, higher costs). But at the macro level, the picture is muddied by simultaneous demand destruction (fewer immigrant consumers spending money), automation/productivity gains, and the fact that native-born workers haven't rushed in to fill vacated jobs. Economists at institutions like Peterson Institute and NFAP warn of larger long-term GDP and labor force effects, while others (Goldman Sachs, some Fed economists) see more limited macro impact given where the labor market started from.