The Bureau of Labor Statistics reported 303,000 payrolls in March, boosting the U.S. economy. Strong growth often indicates inflation. If demand for goods and services rises, firms must hire more workers and raise wages, which raises corporate costs.
Annual price increase, at over 3%, is above the Federal Reserve's 2% target but considerably below the summer 2022 9% peak. Since post-pandemic immigration has helped firms fill roles at wages that have kept inflation low, economists say it is a fundamental reason the economy has grown stably without raising inflation.
In “Why we have both strong growth and lower inflation,” Goldman Sachs top U.S. economist David Mericle wrote to clients Friday that immigration has boosted labor force growth. He said robust consumer demand abroad is unlikely to raise prices significantly, “if at all,” he said.
The impartial Congressional Budget Office was the first to credit the 2022 immigration surge for growing the U.S. work force. The agency raised its 2033 U.S. labor force prediction by 5.2 million individuals. Higher net immigration is likely to drive most of that rise. Earlier last month, the nonpartisan Brookings Institution said the economy can now handle faster employment creation without raising costs.
Former Federal Reserve economist Wendy Edelberg, head of Brookings' Hamilton Project, that immigration may have a negligible effect on inflation. Fed Chair Jay Powell has said the current wave of immigrants is “broadly neutral.”
The annual rate of average hourly pay increase fell to 4.1% in March from 5.9% in March 2022 after the epidemic. If labor supply and demand were actually out of sync, pay growth would be faster, possibly raising inflation.
Thanks to the immigration influx, firms may tap into the freshly increasing labor pool to meet demand without raising wages to compete for workers. Edelberg said immigration is usually positive for many aspects of the economy, from federal Social Security payments to local businesses seeking for labor or customers.
Gallup survey respondents ranked immigration as the country's “most important problem,” the first time since 2019—making it President Joe Biden's most volatile domestic issue. Republicans have urged on Biden to take harsh measures to stop immigration, while former President Donald Trump dubbed them “not humans” and “animals.”
Follow for more updates