Impact of Soaring Immigration on the US Economy: Insights from JPMorgan

Understanding Economic Dynamics

JPMorgan’s recent research highlights the significant role that surging immigration is playing in shaping various aspects of the US economy, including labor market dynamics and housing market conditions. Chief Economist Michael Feroli outlines how the influx of immigrants is influencing key economic trends and offering insights into the country’s economic performance.

Immigrant Population Growth

The research notes that the US is experiencing a sharp increase in immigration, with an estimated addition of 3.3 million people to the population annually in 2023 and 2024. This surge, as indicated by a Congressional Budget Office report, surpasses the average observed over the past decade by over threefold. However, JPMorgan suggests that the actual growth may have been even higher, approaching four million individuals per year.

Implications for Labor Market

The influx of immigrant workers has significant implications for the labor market, contributing to higher-than-expected employment growth. Despite market expectations of a slowdown, job numbers for January and February exceeded forecasts. With such substantial population growth, employment expansion needs to accommodate new workforce entrants, requiring approximately 200,000 new jobs per month, according to CBO data. This contrasts with the lower estimate of 100,000 implied by US Census figures.

Boost to Output Growth

JPMorgan highlights how the surge in immigrant workers is bolstering US output growth, with the potential for further acceleration as long as the trend continues. Even if productivity per worker among foreign-born labor is lower, the overall output growth remains robust. This observation is echoed by Morgan Stanley and Goldman Sachs, both of which have revised their GDP forecasts upward for 2024, citing the positive impact of increased labor participation.

Housing Market Challenges

While immigration contributes to economic growth, it poses challenges for the housing market. Despite rising demand, housing supply struggles to keep pace, leading to tight market conditions. JPMorgan points out that even with housing completions nearing 1.5 million units annually, vacancy rates for both homeownership and rentals remain at multi-decade lows. High mortgage rates further compound the issue, hindering homeowners from selling and exacerbating housing affordability concerns.

Conclusion: Balancing Economic Forces

JPMorgan’s analysis underscores the complex interplay between immigration, labor market dynamics, and housing market conditions in the US economy. While immigration fuels economic expansion and labor force growth, it also presents challenges such as housing supply constraints and affordability issues. Understanding and addressing these dynamics are crucial for policymakers and market participants alike in navigating the evolving economic landscape.