Immigration helps keep job growth high as inflation cools | Wilnesh News

Immigration – both authorized and unauthorized – has helped keep the U.S. job market hot in recent months without reigniting inflation, economists and analysts say. It’s a favorable but uncertain situation for President Joe Biden ahead of the November election.

A blockbuster May jobs report showed the U.S. economy added 272,000 jobs last month, well above the Dow Jones’ forecast of 190,000. Meanwhile, the U.S. Bureau of Labor Statistics reported last week that consumer prices were unchanged in May and even down slightly from a year earlier.

This dynamic—a heating of the job market and cooling of inflation—is partly the result of rising immigration inflows.

“New immigrants flow disproportionately into segments of the labor force that will be particularly tight in 2022, providing labor supply where it is most needed,” Goldman Sachs analysts wrote in a note to clients in May.

The May jobs report found that the government, leisure and hotel, and health care industries grew the fastest.

“The surge in immigration has created many challenges for communities across the country, but its timing is fortuitous, helping to ease labor market pressures at a time when the Federal Reserve is working to pass higher rates of immigration,” said Mark Zandi, chief economist at Moody’s. information to achieve this goal.

Typically, a hot labor market is like a tightrope that can easily collapse, causing inflation to rise again.

This is because higher employment growth may deplete the labor supply. This forces companies to raise wages to compete for workers, thereby increasing costs for producers and ultimately triggering higher consumer prices and inflation.

But a recent surge in immigration at the U.S. southern border and elsewhere has helped keep the labor pool flush, even as job growth continues apace.

“We’re seeing a significant increase in labor supply through immigration and restored participation,” Federal Reserve Chairman Powell said at the central bank’s press conference last Wednesday.

Zandi also believes that immigrants help the United States maintain a positive GDP. “This reduces the need for further rate hikes and may be critical to ensuring the economy avoids recession,” he said.

While Biden’s critics have focused on the high-profile political liability caused by the humanitarian crisis caused by the migrant surge, At the southern border, economists paint a very different picture of immigration.

Increased immigration inflows in recent years have effectively doubled the number of new jobs the U.S. economy can absorb each month without overheating. Brookings Institution established.

Before the pandemic, congressional forecasters predicted that the U.S. job market would be able to absorb 60,000 to 100,000 new jobs per month by 2024 without triggering a spike in inflation.

According to this model, the 272,000 new jobs added to the U.S. economy in May will sound alarm bells.

But researchers at the Brookings Institution recalculated the government’s estimates — this time, taking into account the impact of immigration on the labor pool. They found that with immigration, the U.S. job market could safely absorb 160,000 to 200,000 jobs per month in 2024.

May’s employment numbers were still too hot to be troubling, as was April’s 0.4% rise in average hourly earnings, according to the Brookings Institution.

But the gap between the jobs being created and the maximum the U.S. economy can absorb without triggering inflation is much smaller than it would have been without the recent influx of immigrants.

Biden cited the May jobs report and a solid consumer price index as evidence of what he called “America’s great comeback.”

Biden said in a statement on June 7: “Under my leadership, 15.6 million more Americans have the dignity and respect that work brings. The unemployment rate has remained at 4% or below for 30 consecutive months. This is the longest period in 50 years.

It’s the latest version of Biden’s campaign to promote optimism about the U.S. economy to voters.

For the White House, it’s a critical case the president needs to make and part of a broader fight to change the way some Americans view Biden as responsible for the high cost of living.

Biden’s recent executive actions to tighten restrictions on asylum seekers could threaten the economic backbone immigrants provide. However, the policy is still being implemented Fault and legal challenges, delaying its full impact.

At the same time, former Republican President Trump promised that if he is re-elected, he will Carrying out mass deportations of 15 to 20 million immigrants A person residing in the United States without authorization.

If Trump’s policy overcomes legal challenges and is actually implemented, it’s difficult to quantify the outsized impact it would have on the U.S. economy.

However, in the short term, analysts believe that the labor market has recovered enough from the epidemic to withstand a potential decline in immigration, although it will still affect U.S. productivity levels.

“With the labor market now returning to a better balance…moderate swings in immigration will have little impact on aggregate wage growth and inflation,” Goldman Sachs analysts wrote in a May note.

“However, immigration levels will continue to mechanically affect the real economy, namely underlying employment and GDP growth,” they wrote.