What the migration rebound means for the labor market

There's a sharp rebound in the net number of people migrating to the United States, following back-to-back years of historically low levels that contributed to the nation's labor shortages.

Details: Tucked in the Census Bureau population estimates — released late last year — was a huge jump in net international migration. It added more than a million people to the U.S. population.

Why it matters: More immigrants means more potential workers, which over time might help solve the "structural labor shortage" that Fed Chair Jerome Powell has described as an ongoing economic challenge.

What they're saying: "Although not yet in the official labor market statistics, this is another sign that after a 2020 and 2021 playing catch-up, the labor market may be coming into better balance," Jonathan Pingle, an economist at UBS, wrote in a note.

Between the lines: In many ways, migration had nowhere to go but up, after pandemic travel restrictions eased and borders reopened. Still, the strong rebound is not enough to fill the hole left by two years of ultra-low net migration.

• Even persistent strength won't be enough to cushion the blow from the wave of Baby Boomers aging out of the labor force. It does, however, signal that migration patterns might be returning to the pre-pandemic norms that offered a steady stream of would-be workers that had, for the past few years, been mostly absent.

By the numbers: After a peak of 1.24 million net incoming migrants in 2016, that number fell during the first three years of the Trump administration, and then plunged with the onset of the pandemic.

• It reached a low of 376,000 in 2021. The Census Bureau's initial estimate is that the number rebounded to 1.01 million in 2022.
• That included an influx of those on work visas (roughly 543,000 ), a rebound in foreign students, and refugees and asylum-seekers.

The intrigue: "There's no immediate reason to think the labor force participation and intentions of this most recent year of immigrants versus prior years would be different. They could be, but we don't have evidence of it," says Kathryn Edwards, an independent economic policy consultant.

The big picture: The Census Bureau estimates that overall population growth remained historically depressed in 2022, amid the lowest fertility rate in U.S. history.

• Natural change — the number of births minus deaths, once a key driver of population growth — increased the population by roughly 245,000, meaning immigration dwarfed child-bearing as a source of population growth.

What to watch: These new population figures are incorporated by the Labor Department into their estimation of the household survey, one of two surveys used to compile the monthly jobs report.

• "The next thing to watch will be whether the surge in immigration revises up the labor force participation rate when we get the January data in early February," Pingle notes.