Augusta Saraiva and Enda Curran | (TNS) Bloomberg News
While the increasing number of immigrants in the U.S. has caused disagreement among politicians nationwide and anxiety among many voters, there’s one place where almost everyone appears to be in agreement: Wall Street.
The nonpartisan Congressional Budget Office (CBO) recently calculated that immigration will result in a $7 trillion increase in gross domestic product over the next ten years. The agency came to this conclusion after taking into account the recent surge in immigration.
The release from CBO prompted a flurry of new calculations among investment bank economists to factor in the contribution that these newcomers are making to the labor force and consumer spending. Goldman Sachs Group Inc. adjusted its short-term economic growth forecasts upwards on Sunday. JPMorgan Chase & Co. and BNP Paribas SA were among the banks that recognized the economic impact of the rising immigration in recent weeks.
“Immigration is not only a highly charged social and political issue but also a significant macroeconomic one,” commented Janet Henry, global chief economist at HSBC Holdings Plc, in a note to clients on Tuesday. No advanced economy is benefitting from immigration as much as the U.S., and “the impact of migration has been a crucial part of the U.S. growth narrative over the past two years.”
This month, Morgan Stanley economists Sam Coffin and Ellen Zentner pointed out that faster population growth, driven by immigration, leads to more robust employment and population estimates than initially anticipated — although they mentioned that the full effect might not be captured by official data.
Determining the exact scale of the inflow of foreign-born individuals is challenging due to many entering without visas or other documentation. However, CBO statisticians integrated data from U.S. Customs and Border Patrol to generate their higher projected net immigration, according to analysis by Morgan Stanley.
Goldman estimates that immigration was approximately 2.5 million in 2023, a number much higher than the 1.6 million indicated by the change in the foreign-born population in the official household survey from the Census Bureau.
The positive outlook among economists contrasts with the sentiment observed on the campaign trail, as a surge in the number of undocumented immigrants entering the U.S. through the southern border fuels political tension. The proportion of Americans who view immigration as the most critical issue facing the U.S. now equals a record high based on data going back four decades, according to a recent Gallup poll.
The recent increase from immigration is the result of both a higher number of legal immigrants due to unprecedented visa backlogs in the U.S. and the surge in illegal border crossings. The nation’s 32.5 million immigrant workers now represent about one in five U.S. workers, a record high in government data going back almost two decades.
Certainly, the connection between the greater influx of foreign workers and the rapid post-pandemic recovery has been recognized by economists and policymakers for quite some time now. Federal Reserve Chair Jerome Powell has frequently cited immigration as one of the reasons behind robust economic growth.
Powell mentioned on Wednesday that the high immigration rate plays a role in the strong labor supply.
Powell said in his press conference on Wednesday that the labor market is strong, the imbalances from the early pandemic recovery have mostly been resolved, and there is high job growth and increased supply. Fed policymakers raised their growth forecast for this year to 2.1% from 1.4%, according to their median estimate.
JPMorgan chief U.S. economist Michael Feroli stated that immigration has been crucial to the unexpected job growth, despite a slightly increasing unemployment rate. This has contributed to surprisingly strong overall income and output growth.
Despite concerns that increased immigration could lower wages and conditions in some industries, businesses are urging for changes to bring in more workers through legal channels as the unemployment rate rose to a two-year high in February.
There are almost 9 million open positions across the economy, with 1.4 jobs available for every job-seeker. Foreign-born workers made up a record 18.6% of the civilian workforce in 2023, and the U.S. approved a record number of work authorizations in the fiscal year through last September.
Feroli warned that immigration is very sensitive to policy changes and cautioned against assuming larger numbers beyond the end of this year, as policies could change after the November election.
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