Achieving historically ‘normal’ GDP growth rates will be impossible
The U.S.-Born labor force will shrink over the next decade:
Achieving historically ‘normal’ GDP growth rates will be impossible, unless immigration flows are sustained
Economic Policy Institute
Reduction of net immigration flows would lead to much slower labor force and GDP growth
If we assume that any changes in population levels do not change labor force participation rates, we can make a rough inference about how much any change in immigration levels would affect trends in labor force and GDP growth in the coming decade. (Some more details on this calculation are in the data appendix.)
Figure C shows current forecasts for growth in real (inflation-adjusted) GDP from the CBO and from the Trump administration’s Office of Management and Budget (OMB). The OMB is forecasting far faster growth than the CBO over the next decade. This is true even as the CBO is still projecting immigration flows over the next decade that will be high enough to account for over 100% of U.S. population growth post-2030.
GDP is simply the product of hours worked and productivity. The Trump administration would have to be forecasting either significantly faster growth in hours worked (proxied by the size of the labor force) or significantly faster productivity growth. The potential growth of hours worked by U.S.-born workers is essentially driven entirely by demographic trends.
Gould et al. (2025) highlights there is very little scope for even the most ambitious policy efforts to boost labor force participation rates of the current U.S. workforce which in turn raises LFPR by more than a percentage point or two. Even the most ambitious and effective policy changes largely involve substantial investments in today’s children to make them more likely to search for work as adults. A payoff period to such policy changes is well over a decade.
Given a limited policy scope to boost labor force participation rates, the only input impacting labor force growth is immigration. Clearly the Trump administration is looking to shrink and not expand net immigration. Given this as a stated policy preference, we also calculate what halving net immigration flows or reducing them to zero would do to CBO’s growth forecasts (for details on how we estimated these, see the data appendix). Very roughly, a halving of net immigration would reduce average annual GDP growth by 0.2 percentage points annually in the coming decade, while reducing net immigration to zero would reduce annual growth by 0.4 percentage points annually.
The above discussion implies the Trump administration forecasts could only be met by faster productivity growth.
Figure D shows the implied productivity growth assumptions adopted by the Trump administration versus the CBO.
It then shows the implied productivity growth rates for the Trump administration forecast to hold in scenarios in which net immigration flows were halved or driven to zero.
It is worth noting that the stated position of the Trump administration to increase deportations to 1 million per year. This would be (all else equal) roughly consistent with a halving of net immigration flows if these flows returned to pre-2022 levels.2 Finally, Figure D shows the historic average and maximum 10-year productivity growth rates from each full business cycle since 1969.
The unadjusted forecasts of CBO and the Trump administration numeric imply large differences in productivity assumptions. The administration assuming a productivity growth being a full percentage point faster (or roughly double the pace) of CBO’s forecasts. For the Trump administration GDP forecasts to hold even in the face of reductions in net immigration flows, the assumptions regarding the pace of productivity growth would have to increase.
In a scenario of zero net immigration, for example, productivity growth would have to reach 2.9% annually to meet the administration’s GDP forecasts.
For context, no full business cycle since 1969 has seen productivity growth even close to this dynamic. The previous maximum was the 2.4% productivity growth that characterized the 2000–2007 business cycle. Since 1969, the average productivity growth over full business cycles has been 1.7%. In short, to meet the OMB growth forecasts will be hard enough given current trends in net immigration. If there is any reduction in these trends, productivity growth would have to accelerate to levels not seen in decades.