A working paper from the Federal Reserve Bank of San Francisco has quantified what many labor economists suspected: the sharp drop in unauthorized immigration is producing a measurable drag on U.S. job growth. The finding, sourced by Reuters, lands with the institutional credibility of a Federal Reserve research arm — and that armor matters in a debate where almost every data point gets weaponized politically.
Let that sink in: this is not an advocacy group's estimate or a think-tank projection. It is a working paper from one of twelve Federal Reserve banks, using standard labor economics methodology. When a Fed institution says immigration policy is moving the macro dial, the market should pay attention.
What the paper actually says
The San Francisco Fed's research establishes a causal link between the reduction in unauthorized immigration flows — which accelerated sharply following executive actions early in the Trump administration — and a deceleration in employment gains across specific sectors of the U.S. economy. The mechanism is supply-side: unauthorized immigrant workers, concentrated in a handful of industries, perform labor that the existing documented workforce does not fill at current wage rates. Remove that supply, and the labor market tightens in ways that reduce output and slow hiring at the aggregate level.
The methodology matters here because critics will challenge it. The paper uses regional variation in pre-existing unauthorized immigrant population concentrations to identify the effect — counties and metros with historically higher unauthorized immigrant labor shares show larger employment growth deceleration than comparable areas with lower shares. That design reduces the risk that the researchers are simply measuring an unrelated slowdown that happened to coincide with policy changes.
Which sectors are most exposed
The industries where the effect is most pronounced are predictable to anyone familiar with U.S. labor market segmentation. Construction is the most immediately visible pressure point. The sector relies heavily on unauthorized immigrant labor for framing, roofing, drywall, painting, and landscaping work — tasks that are physically demanding, often seasonal, and chronically understaffed by the documented workforce. A construction labor squeeze has direct downstream effects on housing supply, which is already a critical constraint on the U.S. economy.
Agriculture is the second major exposure. Crop harvesting, processing, and food production depend on seasonal unauthorized immigrant labor at a scale that legal guest worker programs — primarily the H-2A visa — cannot currently meet. Farm operators have testified for years about unfilled positions; the research appears to be validating those accounts in aggregate data.
Hospitality and food service represent a third category of elevated exposure, particularly in Sun Belt metros and tourist-dependent economies where the workforce mix has historically included substantial unauthorized immigrant participation.
The economic arithmetic
The policy debate around immigration tends to treat the issue as purely distributional — who gets the jobs? The SF Fed paper reframes it as an output question. If reducing unauthorized immigration removes workers from sectors where domestic labor substitution is slow or incomplete, the result is not simply a reallocation — it is a net reduction in economic activity. Jobs that go unfilled don't produce goods or services. Construction projects that stall don't add housing units. Farms that can't harvest don't generate food supply.
That framing puts the immigration crackdown in direct tension with other administration priorities. Reducing inflation requires expanding supply. Building the housing that American families need requires construction workers. Agricultural self-sufficiency requires farm labor. These goals are harder to achieve simultaneously with a workforce that has been significantly reduced by enforcement actions.
The political context the numbers don't change
This is where the editor's guidance is worth heeding: the data should speak, and I will let it. The SF Fed paper is not an immigration policy prescription. It is an economic measurement. Reasonable people can look at a documented slowdown in job growth, factor in border security and rule-of-law considerations, and reach different conclusions about the right policy mix. What the paper does not permit is the argument that there is no economic cost. There is. The Fed has measured it.
