Mark Zandi, the chief economist at Moody's, has a blunt message for the Trump administration: your immigration policies are hurting American workers. In a recent interview with Fortune, Zandi pointed to a striking trend: by October 2025, the unemployment rate for foreign-born workers had actually dropped below that of native-born Americans. That's a reversal that should raise eyebrows, and Zandi thinks it's a direct consequence of the administration's crackdown.

Zandi isn't just worried about the labor market; he's worried about the whole economy. He describes a "supply-side stagflationary shock" from tariffs, which means we get higher prices without the growth to match. And tariffs aren't the only problem. He lists three major policy-driven supply shocks that are slowing growth and stoking inflation, including the war in Iran. But here's the kicker: "The only reason why the economy isn't in complete shambles is because of AI," he said.

So why are native-born workers feeling the pinch? Zandi explains that when U.S.-born workers make up a larger share of the labor force, they're more exposed to swings in demand. Plus, there's a skills gap. Immigrants often take on jobs that are physically demanding and arduous, and native-born workers just aren't lining up for them. As Zandi put it, "These jobs are typically ones that are very difficult, very arduous jobs that require a lot of physical hardship, and the native-born workers just haven't done these jobs for quite some time and are in no mood to take them now—certainly not at these wages."

Farm Labor Shortage Risks Food Prices

The broader picture is worrying. The U.S. unemployment rate ticked down to 4.1% in July, but that's partly because the labor force participation rate fell to 61.4%, the lowest since February 2021. In other words, fewer people are working or even looking for work, which makes the unemployment rate look better than it really is.

Zandi's comments echo a warning from the Labor Department: the immigration crackdown could worsen farmworker shortages, disrupt agriculture, and lead to food shortages and higher prices. The department noted that U.S. workers are unlikely to fill these roles because of the physically demanding work and harsh conditions. Foreign-born workers make up about 38% of farming, fishing, and forestry jobs, and a whopping 42% of crop workers could be unavailable if the crackdown continues.

Wage Gains Still Lag Economic Growth

Economist Mihir Torsekar takes a different angle, arguing that the real problem isn't high prices but stagnant wages. Worker pay hasn't kept pace with economic growth or corporate profits for decades. Real average hourly earnings rose just 1.4% from February 2025 to February 2026, which Torsekar says is modest compared to the broader economic gap. That leaves many households stretched thin and increasingly reliant on high-interest credit.

The White House, unsurprisingly, sees things differently. Officials argue that Trump's immigration policies are actually boosting American wages, especially in construction, manufacturing, and transportation. And there's some data to back that up: New York Fed figures show strong wage growth in construction and mining, partly driven by AI data-center demand and policy changes.

So, who's right? It's complicated. But Zandi's warning is clear: the economy is walking a tightrope, and without AI, it might already have fallen. For now, the labor market is a mixed bag, with some sectors booming and others struggling to find workers. The coming months will tell whether the administration's policies will help or hurt American workers in the long run.