Fed Study Highlights Immigration's Critical Role in Sustaining U.S. Labor Force Growth

New research from the Federal Reserve Bank of San Francisco concluded that immigration has become essential to sustaining the size of the U.S. labor force, and that recent drops in net migration could limit its growth in the years ahead.

The analysis estimates that net international migration fell to about 515,000 people in 2025, down sharply from roughly 2 million in 2024. Researchers Evgeniya A. Duzhak and Addie New-Schmidt wrote that the slowdown was driven by fewer undocumented immigrants entering the country, somewhat higher emigration rates, and an estimated 285,000 interior deportations.

"The implied decline in 2025 raises concerns that declines in the working-age population may be persistent and could lead to low or even negative labor force growth in the coming years," the authors wrote in a passage of the document.

Using birth and mortality data, the researchers also found that the native-born working-age population would have begun shrinking in 2012 if not for immigration. They project that the number of Americans turning 16 each year will fall steadily through 2040, while the number aging out of the workforce will continue rising as the baby-boom generation reaches retirement age.

Absent immigration, the working-age population is expected to decline through at least 2040.

Historically, net international migration of around 1 million people per year was sufficient to keep the working-age population expanding. The researchers estimate that 2025 migration levels fall well below what is needed to offset aging trends, even before accounting for deportations.

Their projections indicate that foreign-born workers will add just 0.1 percentage point to prime-age labor force growth in 2025—0.8 percentage point less than projections published by the Congressional Budget Office earlier this year.

The report also outlines how immigration contributes to both labor supply and consumer demand. A smaller working-age population, they note, reduces the pool of available workers and lowers the number of consumers in the economy. Lower immigration could modestly ease core services inflation, the authors wrote, but would also dampen overall economic momentum.

The San Francisco Fed's analysis concludes that past immigration has prevented the U.S. labor force from shrinking and that future declines in migration "would dampen labor force growth," with longer-term consequences for economic expansion.