WSJ Report
Examples of Impact on Construction and Agriculture with High Immigrant Proportions
Concerns are growing that the reduction in labor supply in the U.S. job market due to President-elect Donald Trump's ban on illegal immigration could lead to wage increases and a rebound in inflation, the Wall Street Journal (WSJ) reported on the 28th (local time).
According to the newspaper, new employment in the U.S. increased by an average of 170,000 jobs per month this year, but it is expected to decrease by as much as 25,000 to 100,000 jobs next year. If the second Trump administration strengthens border closures and actively expels illegal immigrants as announced, new employment could be limited to an increase of 70,000 jobs per month.
The U.S. government has expelled an average of 126,000 illegal immigrants annually over the past decade. With Trump, who has put a ban on illegal immigration at the forefront, taking office in January next year, the expulsion of illegal immigrants is also expected to proceed rapidly. According to the Immigration and Customs Enforcement (ICE), as of July, there were 425,431 foreigners in the U.S. who committed crimes but were not detained.
The newspaper predicted that if labor supply decreases due to illegal immigration crackdowns in Trump's second term, wages and prices will rise in sectors such as construction and agriculture, where immigrant workers mainly work. According to the U.S. Census Bureau, immigrants who entered the U.S. from 2020 to last year accounted for 1.8% of the total population. However, in the labor market, immigrant workers accounted for a relatively high proportion, especially in low-skilled sectors. By industry, immigrants accounted for 8.1% in roofing repair, and also held high proportions in agriculture (5.6%), construction (5.6%), and cleaning/housekeeping (6%).
Wendy Edelberg, an economist at the Brookings Institution, analyzed, "Labor supply in these sectors will decrease," adding, "All other conditions being equal, costs (such as wages) are expected to rise."
In the U.S., a record high of 3.3 million immigrants net entered in 2023 alone. This increase in immigrant inflow expanded the labor supply, easing wage pressures and inflation, and driving U.S. economic growth. However, if illegal immigration crackdowns are strengthened in Trump's second term, there are concerns that workers' wages will rise, stimulating prices, and that inflation, which has just calmed, could rise again. U.S. investment firm Evercore ISI forecasted that immigrants will net decrease after the start of Trump's second term. It is expected that by 2025, 100,000 immigrants will net leave, and by 2028, this number will expand to 600,000. Goldman Sachs and JP Morgan also expect immigrant inflows to decrease to about 750,000 annually during Trump's second term.
Edelberg said, "Our economy will grow more slowly, and the labor force will also increase more slowly," adding, "The painful part is that these changes will happen very suddenly."
However, there is also analysis that since immigrants tend to have relatively low productivity and income, the impact on growth and consumer spending is limited. The Brookings Institution estimated that if immigrant inflows are minimized due to Trump's tough stance on illegal immigration in his second term, next year's economic growth rate will fall by 0.4 percentage points.
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