America may have entered a dangerous new economic era—one defined not by temporary recession or a brief decline, but by years of stagnant employment, shrinking labor supply and mounting pressure on the workers who remain.
That is the alarming conclusion from Nobel Prize-winning economist Paul Krugman, who warns that President Donald Trump’s mass-deportation agenda is beginning to reshape the U.S. economy in ways that could prove extraordinarily difficult to reverse.
“Since Donald Trump returned to the White House … job growth has slowed to a crawl,” Krugman wrote Sunday.
The economist acknowledged that the current decline is nothing like the historic employment collapse of 2020, when the COVID-19 pandemic shut down huge portions of the economy.
For a time, several stronger employment reports also appeared to suggest that the weakness recorded during Trump’s second term might be ending.
Follow @allchronologyBut the latest federal data shattered that hope.
According to the Bureau of Labor Statistics, the American economy lost approximately 23,000 jobs between June and July. The agency also revised employment figures for previous months downward, suggesting the labor market had been weaker than initially reported.
“The most recent Employment Situation report from the Bureau of Labor Statistics estimated that employment actually fell in July, while simultaneously revising the estimates for earlier months down,” Krugman wrote.
“Thus July’s report confirmed the now widespread view among economists that the Trump-era job slowdown isn’t a blip.”
Then came his most ominous warning.
“It’s now clear that America has entered a new, possibly permanent era of stagnant employment.”
Only health care and social services reportedly added jobs during the period—an unusually narrow concentration that analysts view as another sign of underlying economic weakness.
Krugman’s argument is not simply that deportations remove individual workers from particular businesses. He warns that reducing the immigrant population could reshape the country’s demographic and fiscal future.
Workers do more than fill jobs. They earn wages, purchase goods, rent or buy homes and pay taxes that fund government services.
When millions of working-age people disappear from the economy, businesses lose both employees and customers. Economic activity slows, while fewer taxpayers remain to support obligations that do not shrink with the workforce.
“Well, it is indeed a problem,” Krugman wrote.
“One reason is that America’s responsibilities—to ensure national security, to take care of retirees, maintain public infrastructure and provide health care—remain the same, but there will now be fewer workers, paying less taxes, than previously expected to meet those responsibilities.”
That imbalance could become especially dangerous as the American population ages.
Social Security and Medicare depend heavily on taxes paid by current workers. If the number of retirees grows while the labor force stagnates or contracts, the financial burden on every remaining worker becomes heavier.
Trump has promised to deport millions of people his administration says are living in the United States illegally. Supporters argue that those removals will free jobs for American citizens and increase wages by reducing competition for labor.
Krugman believes that argument ignores the way the labor market actually functions.
Follow @allchronologyImmigrant workers often possess specialized skills or accept physically demanding, lower-paid work that many native-born employees are unwilling to perform at existing wages and working conditions.
“Foreign-born workers bring distinct skills and are willing to do jobs native-born workers shun, such as emptying bedpans and picking fruit,” Krugman wrote.
“Removing them from the U.S. economy will leave the rest of us poorer and with a lower quality of life.”
The consequences could spread far beyond immigrant communities.
If farms cannot find enough workers to harvest crops, food may become scarcer and more expensive. If nursing homes and hospitals cannot replace employees, patients could face reduced care and longer waits. Construction delays could intensify housing shortages, while restaurants, hotels and small businesses may reduce their hours or close entirely.
Employers could raise wages to attract workers, but those costs may then be passed to consumers through higher prices. Some businesses may automate jobs, relocate operations or simply stop expanding.
That is where Krugman’s use of the word “permanent” becomes especially frightening.
Economic damage is not necessarily irreversible in a literal sense. Future administrations could change immigration policy, and businesses may adapt. But demographic changes, lost investment and abandoned industries can take years—or generations—to rebuild.
A farm that closes does not instantly reopen when workers return. A company that moves production abroad may never bring it back. A family forced out of the country may build a permanent life elsewhere.
Trump has presented mass deportation as a restoration of law, order and economic opportunity.
Krugman sees something very different taking shape: fewer workers, weaker growth, reduced tax revenue and declining services for everyone.
Follow @allchronologyThe jobs report may be revised again, and one month of losses cannot determine the country’s entire economic future.
But for economists already worried that Trump’s policies were draining America’s workforce, July delivered the confirmation they feared.
The slowdown may not be temporary.
It could be the beginning of the new normal.
