Economic Forecast Slower Due To Lower Immigration, New Data Confirm

New population estimates for the United States confirm the educated guesses that economists had been making: population growth was slower last year. That likely portends future weakness in population growth, implying slower total gains for the U.S. economy.

The Census Bureau annually estimates the population for the entire country and the states. Its latest figures show very low population growth in the period from June 30, 2024 to July 1, 2025. (State population estimates are also available and are useful for those running local businesses. Metropolitan area and county estimates will be released later this year.)

A first-approximation to economic growth uses the population multiplied by the average productivity per person. A better approximation looks only at working people, thus excluding children, the elderly and other non-working folks. That information is not so accurately counted, so trends in total population are useful even if not perfectly aligned with economic productivity.

An even better approximation for economic activity adds in the productivity of the specific people who are in—or out—of the population.

Our natural population increase, which is the number of births minus the number of deaths, has run very low in recent years. Most of the fluctuation in total population comes from net migration. We don’t know migration into the U.S. perfectly. We also don’t know the number of Americans who leave the country. The Census Bureau uses a variety of methods to estimate the total as well as the components of population. Though not perfectly accurate, the estimates align well with employment data, so the population figures are in the ballpark.

Most immigrants are working age, but lower skilled, earning lower wages. A drop in immigration has less effect than would a drop of native-born Americans of similar age. That’s not to denigrate immigrants. Wage rates roughly reflect productivity, and the lower wage rates of immigrants, particularly very recent immigrants, means that the decline in migration does not have proportional impact on the overall economy.

However, low-skilled workers are often complementary to high-skilled workers. Imagine the installation of plumbing in new house. Some tasks require high skills, but some don’t: carrying materials from the truck to a specific room, or drilling holes through studs. Other tasks only the licensed plumber will do. If one person does the entire job, earnings reflect all of the tasks performed. But if a skilled plumber works with a “go-fer” assistant, the plumber earns more per hour because he or she is only doing high-skilled tasks. An immigrant assistant presumably is earning more than the best alternative occupation, most likely in a low-wage country.

Turning to the forecast, population growth in the coming years will likely be even lower than the gain through July 1, 2025. Note that we had over one million net migrants in 2016, the last year of the Obama administration. During the first Trump administration, migration gradually declined until the pandemic’s sharp drop. Then migration surged during the Biden administration. The latest year shown on the nearby chart includes the last half year of President Biden’s term of office. The next data point to come will include an entire year of stepped-up enforcement of border restrictions as well as deportations. It will probably come in close to zero.

Labor productivity is only beginning to reflect artificial intelligence. Even then, our past productivity gains have always included sporadic technological innovations. Our data since 1950 sometimes comes in at 1.5% productivity growth per year, sometimes 2.5%, but mostly in between. This era saw the rise of many technological innovations, including computers, shipping containers, 3-d printing and more. Most of these individual innovations had S-shaped effects: slow effects, then rising impacts, then gains at a slower pace. Yet the combined effects of these have resulted in relatively smooth productivity growth. AI may lead to a surge beyond what we have ever seen before—or it might simply be the way that the old growth rate continues.

Over the most common business planning horizons, two to three years, productivity will likely be just a little better than the long run average of two percent.

With approximately zero population growth and two percent productivity growth, inflation-adjusted GDP will increase by a little more than two percent this year and next. Such a growth rate would be slower than in the past, and also slower than we could grow with more immigration. But a slower growth rate is not recessionary, just less positive.

Business planning based on the overall economy should be just a little less optimistic than in past years. Those sectors serving low-wage consumers will see less growth. On the production side, companies that use a large amount of low-skilled labor will see a pronounced hiring challenge. That includes agriculture, food processing, construction, restaurants and hotels.

The economy can be healthy with or without immigration, but it will be different in size and texture with low immigration.