Eliminating immigrants is a “real story” for the economy and a greater supply shock than tariffs, analysts say

• Protest against ice attack The Los Angeles area has highlighted the overall impact of corporate undocumented workers this weekend, as well as legal or other immigrants on the economy. The collapse of immigration represents a greater negative supply shock than President Donald Trump’s tariffs, German banks I said.

President Donald Trump California National Guard Mobilization Protecting immigration officers from protesters highlights the economic consequences of his crackdown on undocumented workers and the sudden decline in labor supply.

The protests in Los Angeles began on Friday. It began Friday as camouflage uniforms, tactical vests and helmets arrived at the armored vehicles to carry out an assault on clothing wholesalers. This was the latest in a series of similarly well-known operations. Companies all over the country.

Also, on Friday, the Labor Bureau issued a monthly employment report. The biggest reduction in back-to-back since 2020. It boosted economic activity after an immigration spiked during the Biden administration.

The number of encounters at the Southwest border has plummeted to 12,000 a month since Trump’s inauguration averaged 200,000 people, according to a Deutsche Bank analysis of data from the U.S. Customs and Border Patrol. over a year and a half from January 2022 to June 2024.

“While everyone is focusing on the effects of tariffs, the real story of the US economy is the collapse of immigration. It’s down by more than 90% compared to past execution rates, which amounts to a slower growth in the workforce of over 2 million people.” “This represents a negative supply shock that is far more sustained for the economy than tariffs.”

Trump points to weak pay growth as a reason for the Federal Reserve to cut interest rates, but his immigration crackdown shows central banks already wary of the inflationary effects of his tariffs.

This is because the slower, growing workforce does not require that much employment to absorb the additional labor supply. In fact, even if the average salary increase from 250,000 in 2024 cooled to 124,000 this month, the unemployment rate was hovering around 4.2% since last summer.

Wall Street believes there is a low break-even point for job growth, or the volume of jobs needs to stabilize unemployment. By the end of this year, that pace should drop from 170,000 now to 90,000 per month from 210,000 last year. Morgan Stanleycited the slowness of deportation and immigration.

Deutsche Bank warned that the immigration collapse will have a widespread impact on financial markets, including the dollar, which have already been hit by Trump’s aggressive tariff campaign.

“Last year, the US wrote that due to the high number of immigrants, it is precisely benefiting from a mix of high employment growth and low-wage Goldilocks,” Saravelos said. “If the recent immigration trend continues, we must follow the opposite happening during that year. As the 2022 energy shocks showed, negative supply shocks are not good news for currency.”

This story was originally introduced Fortune.com