Trump’s Immigration Policies: Unseen Economic Risks

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President Trump’s immigration crackdown has triggered an 80% collapse in net immigration that’s fundamentally rewriting the rules of America’s labor market—yet Goldman Sachs warns artificial intelligence may upend the entire equation in ways economists can’t yet predict.

Story Snapshot

Net immigration plunged from 1 million annually to just 200,000 in 2026 due to Trump administration enforcement policies including deportations and visa processing pauses for 75 countries
Monthly job growth needed for economic stability dropped from 70,000 to 50,000, masking underlying labor market weakness as January’s 130,000 jobs now appears excessive
Goldman Sachs pegs recession risk at 20% with conditions “tilted toward worse” as AI deployment emerges as unpredictable wildcard threatening traditional economic models
Shadow economy expands as unauthorized workers dodge enforcement, distorting Federal Reserve data and complicating monetary policy decisions

Trump Policies Slash Immigration to Historic Lows

President Trump’s second-term immigration enforcement delivered results that exceed even the most aggressive projections from his first administration. Net immigration crashed from the 2010s average of one million per year to approximately 200,000 in 2026, representing an 80% decline. The administration’s multi-pronged approach includes elevated deportations, immigrant visa processing freezes for 75 countries, expanded travel bans, and revoked Temporary Protected Status for certain nations. This enforcement intensity pushed 2025 net immigration to roughly 500,000, with some estimates suggesting flows turned negative for the first time in over five decades.

Labor Market Math Fundamentally Restructured

Goldman Sachs economists led by David Mericle documented how the immigration collapse fundamentally altered labor supply mathematics. The monthly job growth threshold needed to maintain economic equilibrium—the break-even rate—fell from 70,000 to just 50,000 by late 2025. January’s 130,000 new jobs, traditionally considered modest, now represents significant excess when measured against the new baseline. Labor force participation stands at 62.5% with unemployment at 4.3%, yet the broader U-6 underemployment measure sits at 8.0%, hinting at hidden strain beneath surface stability.

Shadow Economy Grows as Workers Evade Detection

Goldman’s analysis reveals an unintended consequence threatening data integrity: unauthorized immigrant workers increasingly operate in shadow economies to avoid detection and deportation. This underground shift corrupts Federal Reserve employment statistics, making it harder for policymakers to gauge true labor market conditions. Job openings declined to roughly seven million, below pre-pandemic levels, while tech sector employment dropped noticeably though remains a small overall share. The report notes labor supply growth collapsed from 100,000 monthly above normal at peak immigration to just 40,000 by late 2025, constraining business expansion plans.

GDP Impact Modest but Recession Risk Elevated

The immigration contraction slowed GDP growth by 30 to 40 basis points compared to the 2023-2024 period, though this represents only five basis points versus pre-pandemic norms when immigration averaged 750,000 annually. Chief economist Jan Hatzius assigned a 20% probability to recession, noting risks skew worse due to weakening labor demand coinciding with the supply shock. Wage and inflation pressures remain muted as the market rebalances, yet the combination of constrained labor pools and potential negative job growth in 2026 threatens to validate recession fears if demand continues softening.

80% Plunge In Immigration Is Reshaping Labor Market Math, But AI Wildcard Looms: Goldman https://t.co/SApqxNJ2kd

— zerohedge (@zerohedge) February 19, 2026

Artificial intelligence emerges as the ultimate wildcard in Goldman’s assessment. Rapid AI deployment could dramatically reshape labor dynamics in ways that render traditional immigration-based workforce models obsolete, amplifying or dampening recession risks depending on adoption speed and sector impacts. This technological disruption adds uncertainty to projections already complicated by shadow labor distortions and unprecedented enforcement intensity. For American workers who watched uncontrolled immigration depress wages and strain public resources under previous administrations, Trump’s policies deliver on border security promises—yet the economic transition carries risks that AI advancement may magnify unpredictably in coming quarters.