Investing.com -- Goldman Sachs analysts said in a note Tuesday that tightened U.S. immigration policies in early 2025 have led to a sharp drop in the annualized pace of inflows for immigrants not receiving visas or green cards, falling from 1.4 million in December to just 0.2 million in February.
“While the number of deportations remained broadly in line with past trends, the reduced inflows imply that total annualized net immigration fell from 1.7mn in December to 0.7mn in February,” said Goldman Sachs.
While the number of immigrant workers already in the U.S. has remained stable, Goldman Sachs notes that the labor force participation rate for recent immigrants has not changed significantly, and their unemployment rate has slightly decreased.
However, the bank’s analysts said a notable decline in the number of immigrant respondents to labor market surveys suggests that some may be hesitant to engage with government data collection efforts.
The analysts warn that if these non-respondents are also avoiding work due to fear of enforcement, their absence would not be reflected in official unemployment figures.
Given the faster-than-expected decline in immigration, Goldman Sachs has revised its net immigration forecast for 2025 down to 500,000 from a previous estimate of 750,000, though analysts acknowledge significant uncertainty around this projection.
The reduced immigration flow is expected to slow U.S. labor force growth. “We expect the contribution to monthly labor force growth from immigration to fall another 40k to modestly below the normal pre-pandemic rate by the end of 2025,” writes Goldman.
The economic impact of this shift is expected to be greater than previously estimated, with Goldman now forecasting a 0.1 percentage point drag on potential GDP growth, up from an earlier estimate of 0.05 percentage points, reflecting the long-term effects of lower immigration on workforce expansion and economic activity.