Are immigrants fixing inflation?
The crush of unauthorized immigrants at the southern border has helped keep wages and prices down.
The surge of unauthorized immigrants at the southern border is likely boosting the labor supply, slowing wage growth and improving the U.S. economy’s ability to expand without setting off a painful wave of price increases, Wall Street analysts note.
“Elevated immigration is boosting labor force growth,” wrote Goldman Sachs analysts early this week. “This means that strong demand growth shouldn’t worsen the economy’s supply-demand balance by much, if at all, because supply is nearly keeping up.”
Recent demographic projections from Congressional Budget Office estimated that 3.3 million immigrants arrived in 2023, with the same amount set to arrive 2024, driven largely immigrants without legal status.
That’s the highest level of net immigration in decades. It reflects, in part, some catch-up from the sharp downturn in immigration that occurred in 2020, amid Covid-related closures of the border to immigrants.
Unauthorized immigrants from South America, Central America, and Mexico have represented the bulk of the surge in immigration. The number of unauthorized immigrants from these three regions probably tripled in 2023, compared to a pre-pandemic average, Goldman analysts wrote.
These people have flocked to states like Florida, California, Texas and New York, where they are heavily employed in construction, food services, and hospitality industries, earning significantly lower-than-average wages.
The impact of immigrants on inflation may be welcome news for economists, and helps other Americans too, as it’s likely part of the reason why the Fed hasn’t had to keep raising rates to push up unemployment in order to lower inflation.
But those facts won’t make the surge of new arrivals any easier to handle politically, especially in an election year.
