The U.S. economy is receiving an unexpected boost towards a soft landing, thanks to a significant increase in immigration. Here’s a concise overview:
Rising Inflow: Immigration of foreign-born workers, which had slowed before and during the pandemic, is now increasing. This surge results from clearing visa application backlogs and accelerated work permit issuance by the Biden administration.
Immediate Impact: While some effects will take time due to work permit processing, executive actions, such as offering work permits to 470,000 Venezuelan migrants, are contributing to the influx of foreign-born workers.
Alleviating Shortages: This rise helps alleviate labor shortages and pressure on wages and prices, though it doesn’t eliminate the risk of recession. It does, however, make it easier for the Federal Reserve to combat inflation without causing significant unemployment—a potential soft landing.
Statistics: Goldman Sachs reports average monthly foreign-born labor force growth in 2023 is 65,000 higher compared to 2022. The foreign-born labor force, after plummeting at the pandemic’s outset, rebounded to nearly 32 million in August.
Record Levels: The share of foreign-born workers in the labor force reached a record high of 18% in 2022, further increasing to an average of 18.5% through August this year. This reflects the clearance of immigration backlogs from the Trump administration and the pandemic’s onset.