According to research from JPMorgan, the influx of immigrants into the United States provides a much-needed economic boost. 

Despite ​facing ​​various ​global ​challenges​, ​the ​surge ​in ​immigration ​is ​​helping to ​bolster ​economic ​growth ​and ​labor ​market ​strength​​​.

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• Immigration surge boosting U.S. economy despite global headwinds.

• The impact of immigration on consumption and the labor market is “underestimated.”

• JPMorgan expects “shallow” Fed rate cuts due to immigration, spending.

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Immigration Surge Boosts U.S. Economy Despite Global Economic Challenges

Underestimated Impact of Immigration

JPMorgan’s chair of global research, Joyce Chang, believes that the impact of immigration on the U.S. economy has been “really underestimated.” 

The U.S. population has grown by nearly 6 million in the past two years due to immigration. 

This​ population increase has fueled consumption and contributed to ​the ​low ​unemployment ​rate, ​which ​remained ​below ​4​% ​in ​​​February ​2024​​​.

Revised Economic Projections

The Federal Reserve recently revised its economic projections, raising its U.S. GDP growth forecast for 2024 to 2.1%, up from 1.4% in December 2023. 

This ​upward ​revision ​reflects the ​resilience ​of ​the ​U​.​S. ​economy ​despite ​high​-interest rates ​and ​the ​Fed’s ​efforts to ​manage ​inflation​​.

Persistent Inflation Concerns

However, the Fed also raised its projections for core personal consumption expenditure (PCE) inflation, now expecting it to reach 2.6% in 2024, up from the previous forecast of 2.4%. 

This​​ ​adjustment ​comes ​after ​January ​​and February ​​inflation ​data dampened ​hopes ​of ​fully ​controlling ​price ​increases​. ​​

The core consumer price index (CPI), which excludes volatile food and energy prices, rose 0.4% in February and was up 3.8% year-over-year.

Immigration’s ​​Economic ​Benefits​

Chang ​argues ​that ​immigration’s ​contribution ​to ​consumption ​and ​low ​unemployment ​has ​​been critical ​to the ​U​.​S​. ​economy’s ​​performance​​​. 

While upward pressure on wages, housing costs, and energy prices continues to pose inflationary risks, she maintains that immigration is “a good thing” for the economy overall, with revenues generated exceeding expenses.

Political Implications​

​Immigration, ​particularly ​​border crossings​​, ​remains ​a contentious ​political ​​issue in ​the ​run​-​up ​to ​the November ​presidential ​election​. 

​Chang ​suggests ​that ​events like ​the ​unfolding ​situation ​in ​Haiti ​could ​further exacerbate the ​issue​​. 

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​However​, she ​emphasizes ​​that ​immigration has ​played ​a ​significant role ​in ​supporting ​the ​strength of ​consumption and the ​labor ​market​​​.

Other Economic Factors

In addition to immigration, Chang cites the U.S. fiscal deficit and energy independence as factors enabling the economy to outperform its peers. 

The Congressional Budget Office projects the federal budget deficit to reach 6.1% of GDP in 2024 and 2025, while the U.S. has reduced its reliance on foreign energy sources, unlike Europe’s ongoing struggles with Russian energy supply.

JPMorgan’s Outlook

Given the persistent inflationary pressures, high government spending, and the impact of immigration, JPMorgan expects the Federal Reserve to pursue a “shallow” loosening cycle, with higher interest rates likely to persist for an extended period. 

The research firm believes that the underestimated effects of immigration and other economic factors will continue to shape the U.S. economy’s performance in the face of global challenges.