In the first two installments of this series on immigration, we looked at the new immigration policies from the Trump administration and modeled the national labor market and GDP impact. Now, we take a more regional approach.
The economic effects of Trump’s immigration policies will also vary widely by geography within the U.S. In what follows, we will discuss how some states will feel the pinch much more than others.
Changes ahead in monthly gains
There is high uncertainty around how large the effects might be, but it is plausible that GDP could fall by several percentage points relative to trend. Meanwhile, wages of non-college-educated workers could rise by up to 8% if annual immigration declines by 1.5 million relative to baseline.
Such a steep decline in the workforce has massive implications for the U.S. economy and labor market. While it wouldn’t be quite enough to drag the U.S. economy into recession, it will dramatically reduce the economy’s capacity as an engine for job creation.
In the wake of the pandemic, the United States has grown accustomed to high job growth numbers, exceeding 200,000 monthly until last year. This was more than sufficient to keep the economy at full employment.
Economists at the San Francisco Fed estimate the breakeven rate (the jobs number required to prevent unemployment from rising) to be somewhere between 100 and 150k. Jed Kolko, the former chief economist at Indeed, estimates it to be even lower, around 86,000.
However, the course of the U.S. labor market could be rapidly altering. With an aging workforce, immigration is necessary to keep the labor force growing. As more workers start to retire and immigration collapses, the breakeven rate could fall to 50k or even closer to zero by the end of this year. In that case, we might have to become accustomed to more frequent negative job reports even outside of recessions.
The South and West attract the highest number of immigrant workers
The U.S. Census Bureau has divided the U.S. into four somewhat arbitrary regions and collects net migration numbers for each of these regions as well as every single state.
Let’s start with the facts. Since 2006, the South, including Texas and Florida, has seen the largest migration inflows, followed by the West. Net migration to the South surged to more than 1.1 million in 2024 alone.
California, Texas, and Florida are leading the pack
On a state level, five states stand out in terms of high migration inflows. California was the clear leader during the 2000s but ever since has experienced lower inflows due to the severe housing constraints in the state. Florida has received ever larger inflows, peaking at more than 410,000 in 2024. Texas experienced a surge of about 320,000 last year. New York and New Jersey are number 4 and 5 on the list of highest net recipients.
Both Texas and Florida received about 1.5 million international migrants over the last decade, contributing to the rapid population growth in those states. There is no doubt that immigration has contributed to the economic boom in the South in recent years; The strong employment growth both states have seen could not have been possible without the influx of workers.
Even as the post-pandemic employment boom peters out, Texas continues to add more than 200,000 nonfarm payroll jobs on an annual basis. That represents 1.5% annual growth in a labor market of a little more than 14 million workers.
Similarly, Florida is adding some 140k payroll jobs in a labor market of 10 million (1.4% growth compared to the national average of about 1%).
However, there are early signs that the labor market in these states is cooling faster than in the rest of the country. Job openings in Texas saw a higher surge following the post-pandemic recovery than the rest of the country and remained elevated throughout the entire period from 2021 to 2024. Since the end of last year, though, they have converged towards the U.S. average.
For Florida, the decline in openings (especially recently) has been even steeper. Throughout 2023 and 2024, the number of vacancies in Florida more or less followed the nationwide trend. In recent months, openings have plummeted by more than 20%, from over 500,000 to less than 400,000.
It’s too soon to be certain, but local labor demand might already be responding to the change in labor market conditions driven by immigration reforms.
It is plausible that labor vacancies in high-migration states like Florida respond quickly to the crackdown on illegal immigrants and immigrants in general. The tightening of labor supply causes recruitment to slow. Employers might anticipate hiring challenges and chronic unfilled vacancies and therefore reduce the number of job postings as recruitment costs surge.
Texas: Economic growth miracle could be curbed by immigration policies
Texas’ economic boom in recent years has been accompanied by a big expansion of the construction industry and the transportation and warehousing sectors. The population surge has been accommodated by a large expansion in the local housing supply. Construction and transportation and warehousing have a high exposure to immigrant labor, with estimates ranging from 30 to 45%. The hospitality sector would also suffer tremendously, as an estimated 25% to 35% of staff are foreign-born.
A significant negative labor supply shock coming from Trump’s immigration policies would surely threaten Texas’ economic growth miracle. Plausible, worst-case estimates suggest a 0.5 to 1.0 percentage point reduction in trend growth.
California: Agricultural labor shortage on horizon
Despite California’s reputation of being the global tech hub, the state also has a relatively large agricultural sector thanks to its unique climate. California contributes about 12% of the nation’s total agricultural output. The work is very labor-intensive and the harvest is hard to automate. Up to two thirds of the agricultural workforce might be foreign-born. The state depends on nearly 800,000 migrant and seasonal farmworkers who cultivate over 400 different agricultural commodities.
Deportations could lead to a complete stop in production for some producers, as domestic workers have not done this kind of farm work in decades.
Florida: Hospitality and tourism squashed
In the case of Florida, hospitality and tourism is the sector that would likely be affected the most by labor shortages. The state has a very high dependency on tourism, which accounts for more than 10% of the state’s GDP. The share of foreign workers in accommodation and food services is extremely high, exceeding 35%, according to estimates.
Other services that rely heavily on immigrant labor include housekeeping, landscaping, transportation, food preparation and food services. All of these sectors will heavily come under pressure as deportations start to ramp up. Worker shortages will drive up prices and cause the quality of services to deteriorate. And some businesses will not survive the sudden staffing issues they are likely to face.
What does that mean for recruiters?
The impact of Trump’s immigration policies varies substantially by geography. Some Northern and Midwestern states are less reliant on immigrant workers. Meanwhile, economic powerhouses and three of the four largest states by GPD, California, Texas, and Florida, will be severely affected. These three states are each highly dependent on the immigrant workforce that Trump is now aiming to deport, and economic growth may suffer more than the national average as a result.
The economic effects for the U.S. are quite clear as we explained in our last piece (lower GDP, high growth of low-skilled wages). For the three states mentioned above, the effects will be amplified as all of them boast a significantly higher foreign employment rate than the national average.
Trump’s migration policies are thus making the job for recruiters even more difficult. Worker shortages will make it harder to fill vacancies. Expect longer vacancy durations and rapidly rising recruitment costs in the geographies and sectors that are affected the most by the shrinking talent pool.
