A new working paper released through the National Bureau of Economic Research finds that the Trump administration’s escalated Immigration and Customs Enforcement activity over the past year has had a “negative and significant impact” on employment of U.S.-born working men with at most a high-school education in sectors most exposed to enforcement, including construction, agriculture, and hospitality — a finding that directly counters the political narrative that mass deportations create labor-market opportunities for native-born workers and one that arrives at a moment when small-business hiring and overall payroll growth are simultaneously slowing.
The paper, titled “Labor Market Impacts of ICE Activity in Trump 2.0,” was authored by Chloe East, an economist at the University of Colorado Boulder, and co-author Elizabeth Cox. The work analyzes how the second Trump administration’s expanded immigration enforcement program affected employment for both immigrant and U.S.-born workers using Bureau of Labor Statistics household-survey microdata and county-level ICE enforcement records. The paper extends East’s longstanding research on the labor-market effects of deportation, which has previously examined the 2008–2014 Secure Communities program and the 1930s Mexican Repatriation.
“The mass deportations in Trump 2.0 are not helping the labor market overall and not creating more job opportunities for U.S.-born workers,” East said in a release accompanying the paper. “Whether you’re studying mass deportations today, whether you’re studying mass deportations in the first Obama administration, as I did before, or whether you’re studying mass deportations in the 1930s, as some of my friends in economics have done, you see the same pattern of results: which is that mass deportations are not only harmful for immigrant workers themselves, but they’re harmful for U.S.-born workers and the labor market more broadly.”
The mechanism is two-fold.
First, ICE activity reduces overall economic activity in affected communities through what economists call a “chilling effect” — undocumented workers stop showing up for shifts, customers stop shopping, local restaurants and businesses see traffic decline, and the multiplier effects ripple through neighborhood economies.
Second, the labor-supply contraction in sectors that rely heavily on immigrant workers — construction, agriculture, hospitality, food processing, and meatpacking — does not produce a corresponding increase in U.S.-born hiring because the businesses themselves shrink, defer projects, or close. East described the construction-industry case as illustrative: a builder that cannot find site laborers because of ICE activity does not raise wages to attract U.S.-born workers; the builder simply builds fewer homes.
The paper’s central empirical finding is that in counties with elevated ICE enforcement activity in 2025, employment among U.S.-born men with at most a high-school education declined relative to comparable counties without elevated enforcement. The effect is concentrated in sectors where undocumented immigrants are heavily represented, suggesting the labor-supply contraction is the binding constraint rather than the wage floor.
The paper’s findings echo a Wall Street Journal analysis published last month that found industries with high concentrations of low-education immigrants have seen slower wage growth than the broader private sector since the start of the second Trump administration — exactly the opposite of what the political framing of mass deportation would predict.
The macroeconomic context amplifies the significance.
The National Federation of Independent Business Small Business Optimism Index released this morning showed 34% of small-business owners reporting job openings they could not fill in April, the highest reading since June 2025 and well above the 24% historical average. The April Bureau of Labor Statistics jobs report showed payroll growth slowing across exactly the sectors flagged in the East-Cox paper. Manpower Group’s most recent Employment Outlook Survey showed construction-sector hiring intentions softening sharply in the Southeast and Southwest — the regions where ICE enforcement has been most concentrated.
The fiscal implications are also material.
The Trump administration has consistently framed mass deportation as a net positive for federal and state budgets, citing reduced welfare and education spending. The East-Cox paper suggests the opposite dynamic dominates: reduced economic activity in affected communities lowers state and local tax receipts, increases unemployment-insurance claims for U.S.-born workers laid off when employers contract, and reduces federal payroll-tax revenue.
The Penn Wharton Budget Model estimated in March that the second-term deportation program could reduce U.S. GDP by 0.4% to 1.0% over five years, with disproportionate impact on the construction, agriculture, and hospitality sectors.
The construction industry’s exposure is particularly acute.
D.R. Horton, the largest U.S. homebuilder, has held volume in part by self-funding rate buydowns and routing buyers through its internal mortgage subsidiary, but the company’s superintendent and project-manager teams have flagged sub-trade labor scarcity in earnings calls. Lennar Corporation’s Q1 2026 revenue fell 13% year over year, with the company citing labor and material-cost pressure alongside the rate environment. PulteGroup, NVR, and Toll Brothers have all flagged similar dynamics. The agricultural sector has reported similar pressure, with the California Farm Bureau Federation estimating in March that 40% of farms had reduced production plans due to labor uncertainty.
The hospitality and food-service industries are next in line.
Marriott International, Hilton Worldwide, Hyatt Hotels, and the National Restaurant Association have all flagged labor scarcity in 2026 outlook documents. Tyson Foods, Pilgrim’s Pride, JBS USA, and other large meatpackers continue to face plant-level labor shortages, with ICE activity in early 2025 in Iowa, Mississippi, and Nebraska facilities producing temporary production cuts. Cargill, the largest privately held U.S. company, has not commented publicly on the NBER findings.
The U.S. Department of Homeland Security, which oversees ICE, did not provide an immediate substantive response to the East-Cox paper. The Trump administration has continued to defend the enforcement program as core to its 2024 campaign mandate, with President Trump describing the deportation effort at multiple recent rallies as among his most consequential first-year achievements. Border Czar Tom Homan has publicly disputed prior academic research suggesting immigration enforcement reduces overall economic activity.
For the broader economy, the NBER paper arrives at a moment when the inflation, labor, and credit cycles are all showing signs of strain simultaneously. Tuesday’s April CPI print of 3.8% confirms inflation is reaccelerating. The NFIB data show hiring intentions softening. Bank of America’s Aditya Bhave has pushed the next forecast Federal Reserve rate cut to July 2027.
The East-Cox findings add a structural dimension to the cyclical picture: even if the Iran war ends, energy prices normalize, and tariffs ease, the labor-supply contraction from sustained ICE activity could continue to suppress employment and economic activity in the sectors that produce the most physical output for the U.S. economy.
The next release in the NBER working-paper series on this topic is expected later in the summer, focused on county-level fiscal effects. The paper’s findings will be presented at the NBER Summer Institute in Cambridge, Massachusetts, in late July.
JBizNews Desk
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