Immigration Isn’t Causing Unemployment

Wage increases are still just a bit above where they would be over the very longer term to be consistent with 2 percent inflation, but they’re very much coming down to what that sustainable level is. So, we feel good about that. 

Vacancies per unemployed is back to what is still a very strong level. It’s not as high as it was. That number reached 2 to 1, two vacancies for every unemployed person, as measured, it’s now below, it’s around one. But that’s still a very good number. 

Quits have come back down to normal levels, I mean I could go on and on. There are many, many employment indicators and what do they say? They say this is still a solid labor market. 

Clearly, labor market conditions have cooled off by any measure, as I talked about in Jackson Hole, but they’re still at a level, the level of those conditions is actually pretty close to what I would call maximum employment… 

Moreover, Powell does not think that the influx of immigration is the cause for the slightly higher unemployment rate in recent months. Rather, it is clear that he blames general economic conditions influenced by high interest rates for the slowdown: 

There has been change particularly over the last few months and so what we say is, as the risks, the upside risks to inflation have really come down, the downside risks to employment have increased and because we have been patient and held our fire on cutting while inflation has come down. 

The labor market is actually in solid condition. And our intention with our policy move today is to keep it there. 

With an appropriate recalibration of our policy, we can continue to see the economy growing and that will support the labor market. 

We don’t think we need to see further loosening in labor market conditions to get inflation down to 2 percent. But we have a dual mandate, and I think you can take this whole action as, take a step back, what have we been trying to achieve? We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has sometimes come with disinflation. 

Powell is partly reducing interest rates to prevent further increases in the still-low unemployment rate. The same factors cause unemployment rates for both immigrants and US-born Americans. Figure 1 shows the unemployment rate for immigrants and the US-born. It demonstrates that the same underlying economic conditions cause the unemployment rate to rise and fall for both groups. Figure 2 shows the number of unemployed US-born compared to employed immigrants, showing that the significant rise in immigrant employment has not caused an increase in unemployment among US-born Americans. More employed immigrants are associated with fewer US-born unemployed workers. 

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. With inflation coming under control and the interest rate being cut, let’s hope policymakers can create a legal way for the next group to come. 

David J. Bier is the associate director of immigration studies at the Cato Institute. This article, originally posted to the Cato Institute website, is published courtesy of the Cato Institute.