As kids, most of us had a love-hate relationship with back-to-school shopping.

Many remember the excitement of trading their old backpack for a cool new one so they could show off to friends at school. Of course, a matching pencil bag and notebooks with fun designs were also a priority.   

Planning that first-day-of-school outfit also required strategic thinking, since it would be the first impression everyone would get of us after a long summer break.

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The stakes were high — if the outfit or school supplies turned out to be a flop, you risked not fitting in with the cool crowd or getting roasted by other classmates. 

Returning to school meant reuniting with friends and discovering if you had fun teachers. However, the dread of going back to doing piles of homework and reading useless novels is something many would rather not relive. 

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Lately, the uncertain state of the economy has put many parents in a more challenging position, leading them to cut back on unnecessary spending to prioritize more critical necessities.

So what does this mean for back-to-school purchases?

Back-to-school shopping faces economic pressures

Money has been tight for many, leading some to postpone their yearly family vacations until further notice. 

Yet despite looming tariffs that threaten price increases and supply-chain headaches, retailers are doing everything in their power to provide value to consumers so they can also profit from the seasonal spending. 

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For example, major retail chains like Target  (TGT)  and Walmart  (WMT)  have launched summer sales events promoting lower prices on back-to-school products.

Back-to-school shopping proceeds as usual 

Despite it all, nearly three-fourths of consumers expect to spend the same or more on back-to-school shopping this year, with more than one in three anticipating spending more than they did last year, according to PwC’s latest consumer survey.

Technology is a priority for this year’s school supplies list. One quarter of parents plan to spend more than $500, considering that technology is usually pricier than notebooks or pencils. 

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However, consumers are not shopping indiscriminately. Many value-conscious parents will cut back on some categories, with 37% reporting only purchasing items on sale.

“A lot of it is necessities,” said PWC U.S. Retail Lender Kelly Pedersen. “This is just necessary spend every year.”

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• Protests over ICE raids in the Los Angeles area this weekend highlight the crackdown on undocumented workers at businesses and the overall impact of immigration, legal or otherwise, on the economy. The collapse in immigration represents a bigger negative supply shock than President Donald Trump’s tariffs do, Deutsche Bank said.

President Donald Trump’s mobilization of California National Guard troops to protect immigration officers from protesters highlights his crackdown on undocumented workers and the economic impact of a sudden drop in labor supply.

Protests in Los Angeles began on Friday, when armed federal agents clad in camouflage uniforms, tactical vests, and helmets arrived in armored vehicles to carry out a raid on a clothing wholesaler. It was the latest in a series of similar high-profile operations at businesses around the country.

Also on Friday, the Labor Department issued its monthly jobs report, which showed the U.S. workforce shrank in May as the number of foreign-born workers saw the biggest back-to-back declines since 2020. That comes after a surge in immigration during the Biden administration helped boost economic activity.

According to a Deutsche Bank analysis of data from U.S. Customs and Border Patrol, the number of encounters at the Southwest border has plunged to 12,000 people per month since Trump’s inauguration from an average of 200,000 during the year-and-a-half period between January 2022 and June 2024.

“While everyone is focused on the impact of tariffs, the real story for the US economy is the collapse in immigration: down more than 90% compared to the run rate of previous years, equivalent to a slowing in labour force growth of more than 2 million people,” George Saravelos, head of FX research at Deutsche Bank, wrote in a note on Friday. “This represents a far more sustained negative supply shock for the economy than tariffs.”

While Trump has pointed to weaker payroll growth as reasons for the Federal Reserve to cut interest rates, his immigration crackdown gives the central bank, which is already wary of the inflationary effect of his tariffs, another reason to wait and see.

That’s because a workforce that is growing more slowly doesn’t need as much hiring to absorb the additional labor supply. In fact, even as average payroll gains have cooled to 124,000 a month this year from 250,000 in 2024, the jobless rate has hovered around 4.2% since last summer.

Wall Street sees a lower breakeven rate for job growth, or the amount of hiring need to keep the unemployment rate steady. By the end of this year, that pace should fall to 90,000 per month from 170,000 now and 210,000 last year, according to Morgan Stanley, which cited deportations and slower immigration.

Deutsche Bank warned the collapse of immigration will have broader implications in financial markets, including on the dollar, which has already been battered by Trump’s aggressive tariff campaign.

“Last year we were writing that the US was benefitting from a goldilocks mix of high employment growth and low wages precisely because of high immigration numbers,” Saravelos said. “If recent immigration trends continue, it must follow that over the course of the year the reverse will happen. As the 2022 energy shock showed, a negative supply shock is not good news for a currency.”

This story was originally featured on Fortune.com

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