Goldman Sachs Sees Trump Immigration Moves Shaving US Economic Growth

(Bloomberg) -- President Donald Trump’s immigration restrictions are set to have a somewhat negative impact on US economic and labor force growth, with an even more limited effect on inflation, according to Goldman Sachs Group Inc. economists.

The analysts see net immigration to the US plummeting to 750,000 a year, shaving 30-40 basis points (0.3-0.4 percentage points) off potential gross domestic product growth this year, according to the baseline scenario in a research note published Monday. Last year, 2.8 million people immigrated to the US, according to the Census Bureau.

The makeup of migrants would also change, with Goldman seeing zero net unauthorized immigrants as half a million deportations a year offset the estimated number of asylum seekers and other entrants.

Trump has already begun executing his promised crackdown on immigration, ramping up the detention and deportation of migrants, and he has sent flights of undocumented people to home countries including Colombia and India.

In a more extreme case where the crackdown leads to unauthorized immigrants being “afraid to go to work or employers are afraid to employ them, the economic consequences would be more serious,” the analysts led by Jan Hatzius said in the note. Overall, the impacts on inflation should be limited, though.

Unauthorized immigrants make up about 5% of the total workforce, which expands to one-fifth in certain industries such as landscaping and building services, Goldman estimates.

“Abruptly losing these workers could be very disruptive for many of these industries and have a larger inflation impact,” the analysts wrote.

Immigration has bolstered the stunning growth in the US labor market, after more than five million foreign workers joined the labor pool in the past five years, and helped boost payrolls. Going forward, that impact will be reduced, according to Goldman.