U.S. demographic slowdown reshapes labor supply and tourism outlook

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U.S. demographic shift and labor

Highlights

Net international migration to the U.S. peaked at 2.7 million in 2024, is expected to fall to 1.3 million in 2025 and 321,000 in 2026, directly impacting labor supply growth.
Intrepid Travel reported a 67% drop in Canadian travelers, a 30% decline from Australia/New Zealand, and a 24% drop from Europe, Middle East and Africa from 2025 to 2026 due to political and financial deterrents.
Tighter immigration policies and shifting demographics are creating regionally uneven labor market constraints, weakening output and consumer demand particularly in high-growth sectors and international-student-dependent institutions.

Immigration decline alters workforce pipeline

As reported by Business Insider, economists and demographers say the U.S. is entering a more uneven phase of population growth, with fewer young adults aging into the workforce and immigration no longer offsetting that slowdown as strongly as in prior years.

The Congressional Budget Office expects the number of people living in America to peak at 364 million in 2056 before declining, but the more immediate issue for employers is whether enough working-age people are available in the places that need them. The fertility rate peaked in 2007 and is not expected to rebound soon, raising longer-term questions about labor availability and economic expansion.

Immigration has historically helped fill that gap. Census Bureau data cited in the article shows net international migration rose to 2.7 million in 2024 under the Biden administration, then fell to 1.3 million in 2025 and is expected to drop to 321,000 in 2026. Pia Orrenius, a labor economist at the Federal Reserve Bank of Dallas, says immigration typically accounts for about half of U.S. job growth, meaning fewer arrivals can reduce output, slow expansion and weaken consumer demand.

That pressure is especially visible in faster-growing regions such as Texas, where manufacturing projects and data center construction need additional labor. The article also says the White House is pursuing mass deportation efforts, tighter border controls, visa revocations for students and workers, and the end of protections for hundreds of thousands of people from countries including Venezuela and Haiti, making the labor outlook more uncertain across skill levels.

Tourism, regions and employers face uneven impact

Weaker mobility is also affecting visitor-driven businesses. International tourism to the U.S. is softening as higher costs and political tensions deter travelers, with Canada, Europe and parts of Asia among the markets seeing declines.

Leigh Barnes, North America president of Intrepid Travel, says the company has seen a 67% drop in Canadians traveling to the U.S. from 2025 to 2026, a 30% decline in inbound visitors from Australia and New Zealand, and a 24% decrease from Europe, the Middle East and Africa. He attributes the fall to a mix of political concerns and financial pressures, with some travelers uneasy about crossing the border and others discouraged by the cost of visiting the U.S.

The demographic shift is likely to hit regions and sectors differently. Rural areas and places with fewer job opportunities may continue to lose residents, while cities and states with stronger labor demand could still grow, though more slowly. Colleges that rely on international students may also face greater strain if enrollment falls and domestic student pools shrink.

At the same time, an aging population is changing the mix of jobs the country needs, including a greater need for care workers. Steven Ruggles, a history professor at the University of Minnesota, says a tighter labor market could improve worker leverage, wages and job prospects over time, while also pushing companies to invest more in labor-saving technology such as AI to raise productivity.

In a previous article, we explained how AI data center financing risks are growing amid delays, rising costs, and power constraints.

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