Job growth, immigration are directly related, new Fed study argues

It isn't easy to get a handle on what's been going on with the labor market lately. It barely grew last year, then job growth spiked in January.

But a new research note from the Federal Reserve Bank of San Francisco argues that one thing is clear. An analysis of data over several years found a direct relationship between the number of unauthorized immigrants in the country and job growth — meaning you can’t have one without the other.

The San Francisco Fed looked at the Biden-era spike in unauthorized immigration starting in 2021 and a slowdown period from March 2024 to March 2025, and it found that the labor market moved in tandem with immigration flows.

In fact, areas of the country that recently experienced the largest slowdowns in unauthorized immigration also saw the largest slowdowns in employment growth.

Madeline Zavodny, a labor economist at the University of North Florida, said most economists would not be surprised at that correlation.

“But I think a lot of the American public who think that migrants take away jobs from people already here would be surprised,” she said.

The number of native-born workers is shrinking, said Michael Clemens, who researches migration economics at George Mason University. The loss of immigrants, as a result, would have a larger impact on the economy, he said.

“That has the immediate implication that our economic growth, which definitely depends on a growing workforce, will be harmed,” Clemens said.

Among the industries most vulnerable are those most dependent on migrant labor, including agriculture, hospitality, manufacturing, and — the San Francisco Fed emphasized — construction. 

Consequently, Clemens said homebuilding will likely slow. 

“That means reduced supply of homes being chased after by a similar demand,” he said.

That could lead to higher prices for homebuyers.

Zeke Hernandez, a professor at the University of Pennsylvania’s Wharton School, said fewer immigrants also means less tax money collected and less consumer spending.

“They really are more than just labor,” he said.

And their contribution to the economy, Hernandez said, is multifaceted.