Short Description: New research reveals how a sharp drop in unauthorized immigration could subtract nearly a full percentage point from U.S. GDP growth in 2025.
Read Time: 3 minutes, 45 seconds
Main Article
Recent research from the Federal Reserve Bank of Dallas warns that a dramatic shift in U.S. immigration policy could significantly slow economic growth. Using a model built on data since 1955, the study found that an unexpected surge in unauthorized immigration boosts GDP growth for roughly two years. However, the current policy landscape has reversed that flow. With border encounters down 82% from late 2024 peaks and new interior enforcement measures, the study projects net unauthorized immigration has plummeted.
The analysis compares five policy scenarios against a baseline projection from the Congressional Budget Office (CBO). The study’s baseline scenario, which assumes current enforcement levels hold, shows annual GDP growth in 2025 could be 0.75 to 1 percentage point lower than if immigration had followed the CBO’s pre-policy projections. This drag on growth is driven primarily by the reduction in new arrivals at the border, not by interior deportations. Notably, the model suggests these immigration restrictions have only a modest effect on inflation.
The findings highlight a critical economic dependency that developed in recent years. Following the pandemic, growth in the foreign-born population accounted for most U.S. labor force expansion. While the estimates come with significant uncertainty and large error bands, they align with concerns from other economic institutions. A sharp departure from recent immigration trends, therefore, presents a clear headwind to near-term economic expansion, with the effects depending heavily on the future scale of deportations.
Short Summary
The Dallas Fed study indicates that reduced unauthorized immigration could lower 2025 GDP growth by up to 1 percentage point, primarily due to fewer border arrivals. While inflation impacts appear minimal, the research underscores how shifts in immigration policy directly influence economic growth forecasts, highlighting the significant role immigration has played in recent labor force and economic expansion.
