The numbers came in and they told an uncomfortable story. The U.S. economy shed 23,000 jobs in July, yet the official unemployment rate moved lower — because hundreds of thousands of workers simply left the labor force rather than show up as jobless. The July jobs report, read alongside the Trump administration's ongoing enforcement actions, points to a supply-side contraction that free-market economists cannot ignore.
The care economy takes the first hit
Health care has been the single pillar propping up an otherwise soft labor market for three years. In July it added just 22,000 jobs — well below its 36,000 average monthly gain for the prior year. Social assistance, covering daycare and services for the elderly and disabled, also slowed sharply.
Those are sectors 'dominated by immigrant labor,' Diane Swonk, chief economist at KPMG, told Fortune. The data back her up: in 2022, 28% of direct care workers in the United States were immigrants, up from 21% in 2011, according to PHI, a research organization that studies the direct care workforce. The industry still needs to fill nearly a million new positions over the next decade as the population ages.
Roughly 200,000 workers whose temporary protected status (TPS) was terminated at the end of July held many of those positions, Swonk noted. An additional 400,000 Venezuelan workers are set to lose their work authorization in October, adding another wave of labor-force exits to an already tightening market.
The cost shifts — but it does not disappear
When paid caregivers exit, unpaid family caregivers absorb the load. Americans already provide an estimated $1 trillion worth of unpaid care annually, with 59 million people putting in an average of 27 hours a week — the labor equivalent of roughly 24 million full-time workers, according to AARP's most recent Valuing the Invaluable report. Swonk said that burden is rising 'quite dramatically, and it's in every single profession.'
Those family caregivers who step back from paid employment never register as unemployed. 'If they're not participating,' Swonk explained, 'they won't be counted as unemployed either.' That mechanism explains the paradox of falling unemployment alongside falling payrolls.
Bill Adams, chief U.S. economist at Fifth Third Bank, reached the same conclusion: the unemployment rate is dropping 'for the wrong reason.' Immigration, he wrote, 'compensated for the aging of the workforce in the first few years of the post-pandemic expansion, but that's not happening anymore.'
Construction tells the same story
Immigrants make up 26.3% of the U.S. construction workforce — roughly one in three tradespeople — according to an analysis of Census data by the National Association of Home Builders. New research by economists Chloe East and Elizabeth Cox found that areas with larger increases in ICE arrests saw employment fall among likely undocumented immigrants. U.S.-born workers did not fill the gap. For every six male undocumented workers pushed out of the labor market, one U.S.-born male worker also lost employment. In construction, employment among U.S.-born men with a high school degree or less fell 3% after ICE surges.
'Foreign-born and native-born workers complement rather than purely substitute for each other,' Swonk said. 'They affect the entire ecosystems of regional economies.'
CEO Times take
Free-market principles demand clear eyes on supply and demand, wherever the data lead. The July report shows a labor market that is not rebalancing — it is contracting. Capital invested in construction, elder care, and hospitality depends on predictable labor supply. When that supply evaporates faster than native-born workers can be trained and deployed, project timelines slip, margins compress, and the taxpayer quietly absorbs the difference through unpaid family labor and rationed public services.
The enforcement agenda may be sovereign prerogative. But policymakers who want growth alongside enforcement owe the market a credible answer to a simple question: who fills the gap, and on what timeline? Until that answer arrives, the bond market — and the jobs report — will keep asking it.
