IMMIGRATION & JOBSImmigration Isn’t Causing Unemployment
Immigrants are not taking jobs away from Americans or causing the unemployment rate to rise. A decline in immigration would be a bad sign for the labor market. Immigrants come when job opportunities exist. As the labor market has cooled, fewer immigrants have been crossing the border illegally since the start of the year.
While announcing an interest rate cut last month, Federal Reserve Chair Jerome Powell made comments about immigration that many have misconstrued to argue that immigration is increasing unemployment.
Question: We’ve only been running a little above a hundred thousand jobs a month on payroll the last three months. Do you view that level of job creation as worrying or alarming, or would you be content if we were to kind of stick at that level?
Powell: It depends on the inflows, right? If you’re having millions of people come into the labor force then, and you’re creating a hundred thousand jobs, you’re going to see unemployment go up. So, it really depends on what’s the trend underlying the volatility of people coming into the country. We understand there’s been quite an influx across the borders, and that has actually been one of the things that’s allowed [the] unemployment rate to rise, and the other thing is just the slower hiring rate, which is something we also watch carefully. So, it does depend on what’s happening on the supply side.
Powell was not saying that immigration caused unemployment. Rather, he was making a simple point about basic mathematics. He was explaining how it is possible that high job growth was continuing, but the unemployment rate had still risen somewhat. From a mere mathematical standpoint, immigration has “allowed the unemployment rate to rise” alongside more employment because, without immigration, employment would have fallen.
Powell’s point was that if this level of job growth continued without immigration, then this would be a sign of a healthy labor market. However, given the reality of how many new immigrants have come, job growth right now needs to be even higher to keep the unemployment rate low—hence the rate cut.
Powell is absolutely clear that he believes the labor market is in good shape, notwithstanding the “influx across the borders.” Some quotes:
We’ll start with unemployment, which is the single most important one probably, you’re at 4.2 percent. That’s, I know it’s higher, we were used to seeing numbers in the mid- and even below mid-threes last year, but if you look back over the sweep of the year, that’s a low, that’s a very healthy unemployment rate. And anything in the low fours is a really good labor market.
Participation is at high levels … adjusted for demographics for aging.
