The U.S. labor market has undergone a significant transformation due to President Donald Trump's immigration policies, according to a new report from the Dallas Federal Reserve. The breakeven rate of employment growth—the number of net new jobs needed to keep the unemployment rate steady—has turned negative, allowing the economy to shed jobs without increasing unemployment.
Impact of Immigration Crackdown
The report highlights that net unauthorized immigration reversed in the latter half of 2025, averaging -55,000 per month. This decline has contributed to a stagnant labor force, reducing the need for new job creation. Historically, monthly job gains of 125,000-150,000 were required to accommodate workforce entrants. However, the updated estimates suggest that net job losses can now occur without destabilizing the labor market.
Incorporating these updated estimates of net unauthorized immigration into our full model yields substantially lower breakeven employment growth than previously estimated.
Labor Force Participation Declines
Labor force participation has also seen a gradual decline, particularly among men in their 20s and 30s, women aged 20-24, and men over 55. While the Dallas Fed economists caution against attributing this decline solely to immigration, other studies indicate that immigrant worker flows previously bolstered employment on a one-to-one basis.
Federal Reserve Implications
The findings have significant implications for the Federal Reserve, which aims to achieve maximum employment and price stability. Despite reduced payroll gains, the unemployment rate remains historically low, prompting cautious interest rate adjustments. The March 2026 unemployment rate of 4.3% reflects minimal change from February 2025, reinforcing the report's conclusions.
The Dallas Fed report underscores a pivotal shift in labor market dynamics driven by immigration policy, reshaping how payroll growth is evaluated in the context of economic stability.