In his Wednesday rate cut announcement, Federal Reserve Chair Jay Powell mentioned immigration. He was talking about how job gains have slowed down significantly since earlier this year and that’s likely connected to lower levels of immigration that we’re seeing under President Donald Trump.

To support stable prices and maximum employment — the Fed’s dual mandate — the Fed must decide whether Labor Department data is hot or cold.

But to understand that, “you have to understand what's happening with the immigrant population,” said Michael Strain, senior fellow and director of economic policy studies at the American Enterprise Institute.

Immigrants made up a huge number of new job seekers under President Joe Biden. But unemployment was steady because massive amounts of new jobs were also created. 

“If we had a month where the economy added, say, 250,000-net new jobs, that looked like a decent month,” Strain said.

Those new job seekers from other countries found jobs.

“But if the number of foreign-born people drops dramatically, as it has under President Trump relative to President Biden, then the number of net new jobs you need for a decent month drops dramatically,” Strain said.

Now there are far fewer new job seekers out there because of the new administration’s restrictive immigration policies. So the goal posts for what healthy job growth looks like changed.

That could make for some pretty interesting labor data ahead, said Yelena Shulyatyeva, senior U.S. economist at The Conference Board.

“We could be in an awkward situation when we have a few months of negative payrolls growth, but not in a recession, and it could be like close to zero and still be considered as a relatively healthy labor market,” she said.

Part of why these things can balance out is because immigrants aren’t just workers — they’re consumers too, said Wendy Edelberg, a senior fellow in economic studies at the Brookings Institution: 

“They are neither supplying their labor nor spending money in the U.S. And so what this means is that the current immigration policy is not just reducing labor supply, it's also reducing how many people employers want to hire,” she said.

Immigrants who have left the U.S. are no longer buying goods and services here. And that eliminates the demand for certain jobs.