Or, why has the US done so well. Part of it’s immigration. From Goldman Sachs “Upgrading Our GDP and Payrolls Forecasts to Reflect Elevated Immigration (Walker)” released yesterday:
Recent studies suggest that Census data used for the household survey of the employment report understated immigration in 2023. We estimate that immigration was 1½mn above the trend of roughly 1mn per year in 2023, which implies an 80k boost to the monthly breakeven rate of job growth to 155k. We expect immigration to be about 1mn higher than usual this year, implying breakeven job growth of around 125k and a 0.3pp boost to potential GDP growth in 2024 from faster labor force growth.
We have updated our payrolls and GDP forecasts to incorporate the ongoing boost from above-trend immigration. We now expect payroll growth to average 175k/month this year and slow to 150k/month by year-end, though we expect this to only lower the unemployment rate a touch to 3.8% by year-end. We have also raised our 2024 real GDP growth forecast by 0.3pp to +2.4% on a Q4/Q4 basis (or +2.7% on a full-year basis), mostly by upgrading consumption growth.
This follows on the back of a report in the Economist this week, as well as a CBO report (on demographics) earlier. The most comprehensive analysis of the business cycle implications is in a Brookings report by Wendy Edelberg and Tara Watson.
One way to see the impact of immigration on the supply side is to see the what happened to the change in the labor force — foreign born and native born — over time.
Figure 1: Top panel: Change in labor force since 2017M01 (black line), native born (blue bars), foreign born (tan bars), all in 000’s, s.a. Bottom panel: Average hourly earnings of leisure and hospitality services, production and nonsupervisory workers (black, left scale), of food manufacturing (teal, right scale), both in 2022$. NBER defined peak-to-trough recession dates shaded gray shaded gray. Red dashed line at start of Biden administration. Source: BLS, NBER and author’s calculations.
Note that as the foreign born share of the change in the labor force increases, wages stop rising (for leisure and hospitality) and fall slightly in food manufacturing, before rising again.
How would I interpret the shocks in an AD-AS model? In Figure 2, immigration shifts out potential GDP (Yn), even as AD shifts to right.
Figure 2: AS and AD shifts with immigration influx.
The reversion of labor force to trend, in part by additions of foreign born individuals, shifts out the long run (vertical) Aggregate Supply curve as Yn rises to Y’n. This pulls down the short run Aggregate Supply curve to AS’. The increase in population associated with the higher pace of immigration shifts out aggregate demand to AD’. In this depiction, the price level rises only modestly compared to what would have happened had the increase in labor force not occurred.
Despite the fact that I am providing this link, pgl might actually approve.
https://immigrationforum.org/article/legal-immigration-to-the-united-states-national-quotas-americas-immigration-system/
The issue never has been legal immigration. It is about the flood of people simply showing up and disrupting communities and services and budgets.
https://www.nytimes.com/2023/09/07/nyregion/adams-migrants-destroy-nyc.html
It would also strengthen the process for screening and background checks while reducing the incentives to bypass the legal processes.
https://www.usatoday.com/story/news/nation/2013/04/24/immigration-background-checks/2109199/
It would make sense to have some sort of adjustment process to the annual number of new visas based on the need for worker and the current economic conditions. The key point is that immigration into the US is a privilege, not a natural right and should be managed in the best interests of the US rather than simply reacting to being overrun.
Bruce Hall: Didn’t Mr. Trump say something about getting more immigrants from places like Norway, instead of elsewhere (he actually termed the “shi*hole countries”)? The “shi*hole countries” he enumerated had the unifying theme of being predominantly non-white populated. That had no distinction regarding legal vs. illegal immigration. Hence, I conclude that you are incorrect in your assertion.
Professor Chinn, I don’t believe I referred to former President Trump. So, barring that, do you have an issue with the idea that legal immigration number should adjust to US economic needs for labor? People who come into the US legally tend to be screened and considerably more productive immediately. This also could be an expansion of the H-2B workforce. I remember in the late 60s how North Dakota (where I was stationed in the USAF) had a massive influx of migrant workers from Mexico who arrived for the early fall harvest. After the Dakotas, they gradually moved southward to follow the harvests and then returned to Mexico for the winter and working the Mexican farms.
This program could be expanded as necessary when the food industry needed more workers than they could get locally. All of that would be a far cry from what is happening now at the southern border where millions are crossing into the US annually. Of course, the counterpoint is that these are asylum seekers. Actually, that’s a small percentage of those crossing into the US illegally… at least until recently when it became the claim de jour.
Between 1990 and 2021, the US admitted 767,950 asylum seekers into the country. In 2021 alone, the US admitted 17,692 asylees, a 42.9% drop from the year before, and the lowest year since 1994.
The US has historically approved more affirmative asylee applicants (481,612 total acceptances since 1990) than defensive asylee applicants (286,338 accepted since 1990).
However, the proportion of defensive asylum seekers has increased in recent years. Defensive asylum was granted to 26.4% of all asylees in the 1990s compared to 39.0% in the 2010s.
https://usafacts.org/articles/how-many-people-seek-asylum-in-the-us/
Bruce Hall: I guess the word “never” got to me. Certainly some people think legal immigration is just fine and all other not. However, I think there is a large group of individuals who think that legal immigration at levels seen at the turn of this century was too high.
Hey Brucie – why are you such a coward? We know you are working for Kelly Anne Conway and racist Stephen Miller and they work for Trump. But little racist Brucie tries to claim he is speaking for Trump. Seriously?
Now to this claim:
‘People who come into the US legally tend to be screened and considerably more productive immediately.’
There is no economic logic or empirical evidence that indicates going through your little legal hoops increases the productivity of a worker. Of course your good buddy Stephen Miller will probably tell you white people have a higher marginal product of labor than Hispanics. MAGA!
pgl, thanks for continuing to follow me.
Under the legal system, people are vetted and a large portion come here under the Green Card program: https://www.uscis.gov/green-card
You won’t hear Eric Adams crying about legal immigrants: https://www.politico.com/news/2023/08/09/eric-adams-new-york-migrants-cost-00110472
As I pointed out previously, asylum seeker constituted less than 1 million immigrants since 1990. Compare that with the number of border encounters in 2023 alone and Eric Adams is right; our system is broken. But you shouldn’t call Eric Adams a racist because he tells the truth. Our cities and states should not have to bust their budgets because old uncle Joe can’t get his act together. But then you’d call him “racist”, too.
I’ve suggested that legal immigration numbers should be adjusted according to the current economic needs for new foreign-born workers. That means more immigrants allowed in when the workforce supply can’t meet demand and, conversely, fewer when workforce supply exceeds demand (as in recessions). Is there something you object to the US immigration policies considering US economic conditions?
Bruce Hall is lying about what the NYC Mayor is mad at. Not immigration in general but rather the racially motivated bus tours Ala the governor of Texas. But I guess Bruce Hall applauds treating Hispanics inhumanely
pgl, no you are wrong.
https://www.politico.com/news/2023/08/09/eric-adams-new-york-migrants-cost-00110472
“The immigration system in this nation is broken; it has been broken for decades,” Adams said, declaring: “Today, New York City has been left to pick up the pieces.”
You may not agree with what he said, but don’t make up what he said.
“The issue never has been legal immigration. It is about the flood of people simply showing up and disrupting communities and services and budgets.”
While I agree that it would be nice if everything ran through legal channels, is there any evidence that illegal immigrants disrupt communities, services and budgets on a widespread basis? We have all kinds of problems, like climate change and the threat of nuclear war and homelessness and Covid. Are the costs and risks to society from illegal immigration more similar in scale to these real problems, or more like wokeness and “they’re coming for yer guns, Bubba!”? Until we know that, we don’t know much.
Considering that nearly all of us who call ourselves American these days are the offspring of immigrants at some point in our family histories, it’s odd that immigration could be such a political issue. Immigrants have always contributed and eventually joined the fabric of society to the point than their descendants are the people who oppose immigration. It has always been a point of wonder for me. The Supreme Court has had a lot of Irish and Italian names as Justices lately. The Irish and Italians weren’t exactly welcomed 100 years ago or so. And on it goes. I suppose the descendants of those who are immigrating now under a variety of circumstances will find somebody they don’t want in the country. We are in the process of running out of places for new immigrants to come from that don’t already have established populations here, though.
I know a number of younger people who plan to avoid having children. The United States would be on the same demographic path as most of Asia and Europe without the influx of new people. Besides, our culture is enriched by the influences of immigrants. Especially food. I cannot imagine a United States without crazy garbled up versions of recipes from all over the world.
There’s lots of reasons to be happy the United States is still a draw for motivated people.
Menzie – as a hippie in Madison WI – what I wonder about is why some want to divide people into “legal” and “illegal” people because you cross some imaginary line? And if that is an issue for you – why not support the bipartisan border bill which would have helped in the documenting of people crossing the line? https://www.whitehouse.gov/briefing-room/statements-releases/2024/02/29/fact-sheet-impact-of-bipartisan-border-agreement-funding-on-border-operations/
Let’s face it – some Fox News focus groups told Trump that creating a “border crisis” with people marching up to Iowa was a good way to create hate and division. Now with the Biden/Dem admin policies working – it is the only issue the GOP has to complain about. https://www.hopiumchronicles.com/p/another-strong-jobs-report-democrats
what I wonder about is why some want to divide people into “legal” and “illegal” people because you cross some imaginary line?
James, that’s what Attila and various Visigoths said.
But to your question, some countries allow unrestricted travel between them, but that’s based on some treaty, agreement, or organization such as the EU. Even those countries restrict citizens of other countries outside of those arrangements from freely entering and staying. It’s call the principle of https://world101.cfr.org/understanding-international-system/building-blocks/what-sovereignty
Immigration (whether legal or illegal) is and always has been the main engine of the US economy. They come with a huge drive to work and produce – way beyond that of the lazy bums who complain/panic about immigrants. The GOP recognize that so even as they use the “invasion panic” for their own political gain they have always refused to do the one thing that would shut down illegal immigration. When Steve Miller in the Trump administration proposed it, they shut him down immediately. Demanding instant work permit verification and instituting jail time for those who hire people without work permits would stop all illegal immigration and force those who are here to leave. GOP refused to do it because they know it would destroy the US economy and (like with abortion) take away the panic attack issue they use to get non-multimillionaires to vote for them. The democrats need to call the GOP bluff on this and propose it.
Then I guess Canada has not learned the lesson that you say is obvious.
https://www.yahoo.com/news/canada-set-targets-decrease-number-190644337.html