Less immigration under Trump will contribute to 2 million-person labor force gap, CBO says

The proportion of American adults who are employed or actively looking for a job was always going to shrink over the next decade as the labor force as a whole ages. But declining birth rates and the White House’s immigration crackdown is set to put an even larger dent in America’s future workforce—a more than 2 million-person gap.

Over the next decade, the U.S. population is forecast to grow an average 0.3% each year, according to an outlook report from the Congressional Budget Office (CBO), published Wednesday. That’s half the growth rate the nonpartisan agency had reported last year, and equates to a downward revision of 2.4 million fewer working-age Americans by 2035. A smaller workforce could have a considerable effect on U.S. productivity for the foreseeable future—but in the Trump administration’s eyes, emerging technologies could help mitigate the blow.

The CBO report noted rising business adoption of artificial intelligence could help productivity stay afloat in the next decade. By 2036, output in the U.S. economy will be 1% higher than it would have been without the help of AI, a value add potentially worth several hundreds of billions of dollars, according to the report.

The report referred to AI’s impact as an “offsetting factor” as the economy runs into a labor force slowdown. It also noted how the shift toward an AI-driven economy already accounts for a sizable share of private-sector spending. Business investment this year, in fact, is projected to grow by 3.9%, fueled largely by the construction of data centers and the purchase of high-end computers and intellectual property necessary to deploy AI at scale. Large U.S. technology firms and so-called “hyperscalers” have already committed around $650 billion so far to developing AI infrastructure this year. This investment surge will likely help the U.S. maintain productivity even as the number of available workers declines, according to the CBO.

The Trump administration has characterized AI’s impact as a potential boon for GDP, with the White House’s Council of Economic Advisors last month reporting AI-related investments were responsible for 1.3% of GDP growth last year, drawing comparisons with the impact of railroad investments during the Industrial Revolution.

But the benefits of AI filling human vacancies and taking over economic growth can only go so far. For one thing, AI doesn’t pay taxes, and fewer people means a smaller taxpayer base. The CBO forecasts reduced net immigration owing to the Trump administration’s policies will lead to 5.3 million fewer people living in the U.S. a decade from now. Shrinking tax receipts will also stress the government’s budget, with actions taken on immigration during Trump’s first year back in office adding half a trillion dollars more to the federal deficit by 2035.

A decade down the line, the absence of humans will be hard to miss. In a report released last month, the Brookings Institute noted “nearly all growth in the labor force has stemmed from immigration flows” in recent years, and reduced entries in 2026 will likely mean negative job creation and slower economic growth. Falling illegal and legal immigration could lead to up to 15.7 million fewer workers by 2035, according to an October study by the National Foundation for American Policy, a public policy researcher. Annual economic growth will also fall by almost one-third due to smaller workforces, the study found.

With many businesses still cautious about integrating AI, whether the technology will improve productivity enough to make up for less human capital is unclear. The CBO report listed growth attributable to AI advancements as one of the key uncertainties in its forecast, but with immigration curtailed and the U.S. natural-born labor force expected to keep shrinking, a lot is riding on AI to deliver productivity gains fast.