The absurd yet dangerous removal of the commissioner of the Bureau of Labor Statistics for the offense of reporting jobs figures as they are collected has overshadowed the reasons why U.S. employment is struggling. There’s the argument that tariff uncertainty has finally caught up to the real economy, and the argument that the country only produces AI data centers and sick people for the health care system to manage. But one important issue has been pushed off to the side: the predictable economic impact of ICE’s terror campaign against immigrant communities.
This will have long-term macroeconomic consequences. Net immigration, which provides a steady supply of available workers in key fields, is way down this year. Employers are scrambling to find substitute workers and worrying about productivity losses. Remittance payments to Mexico have plummeted, suggesting a decline in these workers’ economic contributions, not only to their relatives, but to industries like home care, agriculture, and construction. Recent drops in residential construction could result from a lack of available workers as well.
But there are already visible microeconomic impacts today, not just in the future. The 2,800 arrests in Los Angeles since June, outside Home Depots and car washes and homeless shelters, massively understate the chilling effect of ICE raids on the largest city in the largest state in the union. A report from the University of California, Merced’s Community and Labor Center released last month found that 3.1 percent of the entire private-sector labor force in California didn’t show up for work between May 11 and June 8, just as ICE activity was ramping up in L.A. These numbers resemble the losses from the Great Recession and the COVID pandemic, and if anything, they’ve grown as raids intensify.
Incidentally, more California citizens (271,541) failed to show up than noncitizens (193,428), which has more to do with the lower percentage of noncitizens in the workforce but also shows how legal residents are concerned about being profiled because of their ethnicity. They should be: As our partners at Capital & Main have shown, a number of citizens have been detained in raids across Los Angeles, where half the population is Latino.
Collapsing labor participation matches anecdotal reports about life in L.A. under the fear of abduction. Back in June, Mayor Karen Bass relayed the perspective of business owners that foot traffic in heavily Latino areas was slower than during COVID; she more recently reiterated this at a neighborhood event that I attended. Streets in Latino communities are empty. Metro ridership in Los Angeles—which is disproportionately used by immigrant communities—is at its lowest levels of the year. Summer school programs have seen sharply lower attendance. Fewer kids have been going to the L.A. Zoo, just one of many public places where attendance has dropped. Even rebuilding efforts from the January wildfires have been stunted by raids on construction sites.
The raids are set to go national as ICE reaps billions of dollars from the recent Republican mega-bill.
California’s job cliff is not yet reflected elsewhere around the country, suggesting that it’s a direct result of ICE’s focus on the state. The raids, though, are set to go national as the agency reaps billions of dollars from the recent Republican mega-bill. But the state is big enough for a large fall in the labor force to have a pronounced effect on national hiring.
A federal judge has stopped indiscriminate “roving patrols” in Southern California for the moment because of their racial profiling, a ruling that an appeals court affirmed last week. And the Marines and National Guard troops have largely left Los Angeles, having done absolutely nothing but parade around federal buildings and make one brief arrest. A bit of stasis has come to the city, even as fears linger.
But the damage has certainly been done. And Los Angeles will suffer the consequences imposed on them through no fault of their own. After laying off 600 workers and canceling city services to close a nearly $1 billion deficit this year, any pain from ICE-related slowdowns will have to be dealt with next year.
So, the question should be: Can Los Angeles, or California, simply ask the federal government for the money back?
After all, the city and state played no role in the federal raids that triggered the economic loss. Each missing worker impacts a California business, and each empty shop reduces state and local tax receipts. You could quantify this, as there was a fairly specific start date (when the raids began in earnest in early June) and approximate end date (with the temporary restraining order on roving patrols in mid-July). And then, you can just charge the federal government.
Nobody should expect Trump’s White House, or Congress, to immediately write a check to Los Angeles if presented with a bill for economic damages. But politically speaking, it could be a powerful indicator of who is at fault for the wave of economic turmoil during President Trump’s second term. There is a cost to Gestapo tactics against immigrants in human lives and the fabric of families, and there’s also a financial cost. The latter could be enumerated and broadcast, so everybody knows who to blame.
It would also provide guidance to those cities that are about to see similar crackdowns in the months to come, like New York City, where ICE is expected to “flood the zone” soon.
The problem is finding the specific data. The office of L.A.’s city controller Kenneth Mejia conducts audits and reports on city finances. When I asked whether they have seen any drop-off in city revenues since ICE raids began, communications director Diana Chang said that they lack the resources to fully analyze the economic loss, but they can broadly monitor month-to-month revenues. Mejia has announced an investigation into the Los Angeles Police Department’s potential use of resources to assist in ICE raids and the resulting protests. That’s important but a smaller part of the story.
The controller’s office suggested that the city Office of Finance may be better positioned to analyze the city’s economic loss. When I asked them about it, assistant director of finance Matthew Crawford said that business taxes are typically paid annually in February, making the data unavailable until next year and difficult to disaggregate if the receipts come in low. (Businesses could be down because of wildfires, for example). “Breaking out which impacts are due to ICE activity (or the fear of it) and which impacts are due to the fires, somehow offset with increases due to inflation and natural growth … I just don’t know how we could do that,” Crawford said.
Outside sources may be better suited, either by using business surveys, sales tax receipts, or other data. But if business has truly slowed in Los Angeles, someone should be able to measure it.
If that can be boiled down to a number, a formal request for federal reimbursement could come from Mayor Bass, who has stated that “Los Angeles will stand together against this Administration’s efforts to break up families who contribute every single day to the life, the culture and the economy of our great city.” Local members of Congress could also seek funding reimbursement as part of the annual budgeting process.
None of this work has been done as yet. Mayor Bass’s office has not yet responded to a request for comment. Both Chang and Crawford said that nobody from Congress has requested information from them.
Cities are not legally guaranteed reimbursement for federal policies that harm them. But typically, those policies are applied evenly across the country, like an energy policy that uniformly raises the price of gasoline. But the hot spots for ICE raids are almost entirely located in blue cities, and the Los Angeles action in particular has been targeted, with definable impacts.
We have seen Republican lawmakers try to respond to federal policies that harm their favored areas. In the GOP reconciliation bill, a fund was created as a weak backstop for Medicaid cuts that could have a dramatic effect on rural hospitals. That was seen as necessary to effectively reimburse those rural areas for damaging federal policy. Why aren’t ICE removals and their disruptive, chilling effect on blue areas seen in the same light?
It would take some rudimentary economic analysis to calculate an actual figure that the U.S. government has cost the city of Los Angeles with its terror campaign. The city could make the calculations, and then send the government a bill. “You break it, you buy it” shouldn’t just be a principle at a department store.