Illegal immigration is very much in the news. The deportation of immigrants is a central focus of the Trump administration, along with its campaign to reduce interest rates. For this reason, a pursual of the data may be helpful in examining the scope and approach to the problem.
According to data published online by the Department of Homeland Security, year to date there have been 207,000 immigrants deported. Of this number, 71 percent, or 148,400, had no criminal conviction. Many of these were only guilty of not registering their immigrant status. Often, they were arrested in their attempt to do so. In any case, both the criminals and those without conviction were deported without a court hearing or other form of due process.
This campaign has had effects on both those wishing to enter the US as well as those here. In the 2024 Fiscal Year ending September 30, over 2.9 million people attempted to enter the US. To date in 2025 the number is less than 640,000. In addition, according to Christy Noem, the head of Homeland Security, over 1.6 million have left the US voluntarily rather than risk deportation. Assuming the same percentage of non-convicted immigrants are leaving the country as was apprehended, over 1.1 million immigrants with no criminal history have decided to live elsewhere.
Those who believe the country is in danger of becoming overrun by immigrants will say good riddance. In economic terms the picture is more nuanced. Immigrants are mainly of working age. They support the retirement income of those who draw them with their wages and taxes. If they pay no taxes, it is because they are being exploited by their employers.
Immigrants also do the manual work that most Americans do not want to do. From hospitals to yard work to agriculture, incumbent Americans are not willing to do the work at the wages being offered, assuming they are capable of doing the work at all. Mechanization of such work is years away, if ever. Until then, crops are not harvested, and hospitals and nursing homes go unstaffed.
It was not always this way. Recall John Steinbeck’s novel The Grapes of Wrath, about farm workers in the 1930s. All the characters were Americans. With the passage of time and without wages keeping up, immigrants began to take the jobs. Currently, farm workers in California make $30-35,000 per year with no benefits. Wages in other states are often lower, lacking California’s $18 per hour minimum wage law. The national minimum wage is $7.65 per hour, a figure that has not changed since 2007.
What is the solution? On one hand there is the administration’s tripling of the policing budget of immigrants. The total budget of Homeland Security has increased to $29.5 billion per year, more than the budget of all other law enforcement departments combined, including the FBI and Secret Service. Then there is another $45 billion appropriated for detention facilities, in spite of the fact that by ICE’s own data, the number of detentions has declined by this year over last.
Instead of demonizing immigrants, a couple of statistics are in order. Immigrants make up 18% of the US workforce. Less than a third, or 5%, are here illegally. We as a country cannot expel them without spiting our own growth prospects and economic stability. While there are criminal elements among immigrants, it has been shown in previous studies that immigrants commit crimes at a rate 40 percent less than the incumbent population. There are laws on the books to convict anyone, immigrant or otherwise, if a crime is committed.
No one is arguing against deportation of those who have been found guilty by legal due process. Entry into the country should be restricted to those who can contribute to its prosperity unless there are humanitarian reasons to do so, and that must be judged on a case-by-case basis. This is what immigration courts are for.
If these guidelines sound soft to nativists, consider the US without the work force to support its retired population. Such a scenario is not a threat. It is a coming fact if immigration matters are not dealt with differently. The reality is that the entire developed world is aging, albeit at different rates. It will not be long before immigrants are not considered a burden but an item of competition among wealthy countries. Given our history, how well will the US compete?
The Economy
Economic activity continues at some pace. The manner of the tariff implementation is distorting data both ways. It helps data prior to the tariff implementation due to the amount of pre-ordering to avoid the tariff, then depresses data afterwards as excess pre-tariff inventory is worked off.
A major stimulant for 2026-30 will be the implementation of the infrastructure for Artificial Intelligence (AI). The cost of constructing everything from server farms to electrical generation and transmission is expected to be in the billions. Most large tech firms have signed on to an arms race of sorts to be first with the AI service. This is adding an additional level of uncertainty to the stocks associated with the same. Previously, most of the firms have worked with an asset-light approach to business. AI will change that.
Inflation
Inflation data has been distorted by the tariff implementation. To the extent that importers shield their customers by excessive pre-implementation purchases, they are delaying the tariff’s effects but not stopping the same. The bottom line is that inflation is currently running above the Federal Reserve’s 2% target with an upwards future bias.
The administration has used tariffs against Brazil as an instrument of foreign policy. This has no precedent as tariffs were originally supposed to be to even out trade imbalances. As of last year, the US had a trade surplus with Brazil. Because Trump feels Brazil’s former president should not be convicted of staging a coup similar to January 6, he has unilaterally imposed 50 percent tariffs on goods from Brazil. Much of our beef, especially hamburger for fast food chains, comes from the country.
Interest Rates
On Friday of this week, Federal Reserve chair Jerome Powell is set to deliver a major address at Jackson Hole, Wyoming. Much speculation surrounds the event in terms of whether the Fed will reduce interest rates at their meeting in September.
The reality is that inflation is heating up, which would argue against an interest rate cut at this time. Secondly, there is slower job creation in part due to fewer people for hire in light of the immigration dragnet. Couple this with the number of people retiring, and the profile of a country headed to a period of stagflation (stagnant economy, higher prices) begins to emerge.
The Stock Market
Stocks in general are churning. Growth leaders like tech are treading water as a group, while value names, especially among somewhat smaller firms, are moving forward.
There seem to be two groups of investors in this market. The first is the short-term speculator, who uses his account to catch trends that last for a few hours, much like catching lighting bugs in a bottle. The second is the longer-term investor, who at times becomes frustrated when various scenarios are upturned by political events that seem to have little in the way of economic justification.
Time will tell us what we need to know. However, short-term styles tend to rely greatly on making a lot of transactions. This can be a risk in itself, to say nothing of relegating gains to ordinary income. Longer term is perhaps less exciting than daily trade, but over time more rewarding for most investors. The trick will be for longer-term investors to hold on to realize their potential even when the market is being rocked by the machinations of short-term traders. For too many people, the last trade of the day dictates the value of the portfolio. This is not always the case.
Warren M. Barnett, CFA
August 20, 2025
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