Census Bureau data released in late January showed that US population growth had slowed to its lowest level since the start of the pandemic, with only 1.8 million new immigrants arriving in the country. The total US population for the year ending June 2025 was 341.8 million, representing a 0.5% increase.

This was the slowest growth rate since 2021, when global migration virtually ground to a halt due to travel and health restrictions during the pandemic.

In a research note, Morgan Stanley experts including Michael Gapen and Sam Coffin argued that immigration is the "primary driver" of the population growth slowdown.

Notably, this figure covered the final six months of President Joe Biden's administration, as well as the first six months of his successor, President Donald Trump's, second term.

Since returning to the White House, Trump has made cracking down on immigration one of his primary priorities, though his administration's tactics for achieving this goal have come under considerable criticism. This was recently reflected in public protests following the killing of two US citizens in Minnesota by US agents last month, among other shootings.

While the economic impact of the Trump administration's immigration policies remains largely unclear, Morgan Stanley analysts suggest that slowing population growth should lead to a decline in the potential hours worked by US residents.

Without a simultaneous acceleration in productivity, the rate of potential output in the US economy could fall below 2.0% again this year, they predict.

However, the analysts noted that "the decline in potential due to immigration enforcement does not occur in a vacuum," adding that faster productivity growth helps support future economic expansion.

The AI ​​spending boom was accompanied by US labor productivity growth reaching its fastest pace in two years in the third quarter, but AI's impact on this metric remains a subject of some debate. Morgan Stanley analysts stated that while they are not yet ready to conclude that an AI-driven productivity boom has occurred, "cyclical forces" could also be a factor.

"We believe there are currently several factors supporting the growth in hourly output, including post-pandemic automation to offset costs, efficiency gains driven by cost pressures (which may have arisen from restrictive trade policies), the end of post-pandemic labor hoarding, and the emerging AI wave," the analysts wrote.

In the third quarter, the Labor Department reported that non-farm productivity, a measure of hourly output per worker, grew at an annualized rate of 4.9%—the fastest such pace since the third quarter of 2023.