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.
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.
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