As the Trump administration moves to remove hundreds of thousands of workers from the United States, American workers are not simply stepping into the vacancies left behind. Instead, those jobs appear to be vanishing alongside the departed workers—a dynamic that economists say helps explain a puzzling July labor report.

The U.S. economy shed 23,000 jobs last month, yet the unemployment rate declined as the overall labor force contracted. According to Diane Swonk, chief economist at KPMG, the country's intensifying deportation policies may hold the key to this paradox. The pattern marks a notable shift from the post-pandemic recovery years, when immigration was a primary engine of labor force growth, helping offset the retirement wave of baby boomers and keeping participation rates from declining even further.

Health care, which has served as the backbone of an otherwise sluggish labor market for three years, added just 22,000 positions in July—far below its average monthly gain of 36,000 over the prior year. Social assistance services, including daycare and support programs for the elderly and disabled, also cooled.

"Those are the sectors dominated by immigrant labor," Swonk told Fortune.

In 2022, immigrants accounted for 28% of direct care workers in the U.S., up from 21% in 2011, according to PHI, a research organization focused on the direct care workforce. As the population ages, the industry projects a need to fill nearly one million new positions over the coming decade—a demand projection that now collides directly with the removal of workers who currently hold many of those jobs.

Many of those roles were held by the approximately 200,000 individuals whose Temporary Protected Status (TPS) was revoked at the end of July, Swonk noted. An additional 400,000 Venezuelan workers concentrated in nursing homes, hospitality, and construction are scheduled to lose their work authorization in October, creating a sequential pipeline of labor disruptions across multiple sectors.

The timing compounds the problem. The labor disruption is colliding with state-level reductions to Medicaid, the largest payer for long-term care services.

"Even as some employers lose those workers, we're not going to be able to afford to replace them at the wages necessary," Swonk warned. "That means rationing, or more people doing unpaid care at home."

That unpaid care is where the economic burden shifts onto native-born workers. According to AARP's most recent Valuing the Invaluable report, family caregivers already provide an estimated $1 trillion in unpaid care annually, with 59 million Americans contributing an average of 27 hours per week—the labor equivalent of roughly 24 million full-time workers.

Swonk said this burden is escalating rapidly and spreading across occupations, noting that unpaid eldercare "has gone up quite dramatically, and it's in every single profession."

As fewer paid caregivers remain available, more Americans are staying home to provide care themselves, further shrinking the labor force without being counted as unemployed. "If they're not participating," Swonk explained, "they won't be counted as unemployed either."

Bill Adams, chief U.S. economist at Fifth Third Bank, identified the same pattern, describing an unemployment rate falling "for the wrong reason." He wrote: "Immigration compensated for the aging of the workforce in the first few years of the post-pandemic expansion, but that's not happening anymore."

Beyond the care economy, evidence continues to mount that native-born workers are not absorbing the jobs vacated by immigrants. An analysis of Census data by the National Association of Home Builders found that immigrants constitute 26.3% of the U.S. construction workforce—roughly one in three tradespeople. When contractors lose enough workers to delay projects, demand for the remaining workforce on those projects can decline in tandem, a dynamic that also threatens to deepen the nation's persistent housing supply shortage.

Research by economists Chloe East and Elizabeth Cox, examining the escalation of immigration enforcement during Trump's second term, found that areas with larger increases in ICE arrests experienced employment declines among likely undocumented immigrants. However, U.S.-born workers did not fill the gap. Instead, they also lost ground: for every six male undocumented workers pushed out of the labor market, one U.S.-born male worker lost employment as well. Construction was hit hardest, with employment among U.S.-born men with a high school education or less falling 3% following ICE enforcement surges.

"Foreign-born and native-born workers complement rather than purely substitute for each other," Swonk said. "They affect the entire ecosystems of regional economies."