Jun 7, 2024 - Economy

How Biden's border restrictions could affect the labor market

Illustration of a briefcase outline made with barbed wire

Illustration: Natalie Peeples/Axios

The high job growth of the past few years was driven in large part by immigration, but now the Biden administration is looking to curb migrants' entry into the country.

Why it matters: The strength in the job market helped underpin a surprisingly strong economy amid historic interest rate hikes. The big question now is whether the new border restrictions will slow either the job market or the economy overall.

  • If it does, it'll probably take a while to shake out — likely past Election Day.
  • Much of the growth in the job market in recent years has come from lawful immigration — and the administration's actions won't impact that.

Catch up fast: On Tuesday, the administration issued an executive order preventing people who unlawfully cross the Southern border from seeking asylum. Instead, they'll be sent to their home country or removed to Mexico.

  • When the number of people crossing the border is low enough for officials to manage safely, then this rule will be discontinued.

Zoom in: About half of the non-farm payroll job growth since October 2023 has come from asylum-seekers, refugees and other migrants who have been authorized to work in the U.S., per a research note from Standard Chartered Bank released last month.

By the numbers: On average, 231,000 jobs were added to the economy each month since October 2023 — excluding those migrants, it would be more like 125,000, according to their analysis.

  • Migrants comprised one-third of the monthly jobs numbers in the 12 months before that.

Yes, but: A large percentage have entered the U.S. legally and wouldn't have been impacted by this type of executive order.

Zoom out: The Standard Chartered researchers used data from U.S. Citizenship and Immigration Services on the number of immigrants who received authorization to work in the U.S.

  • The figures line up with a Brookings analysis of Congressional Budget Office data earlier this year that attributed higher-than-expected post-pandemic job gains to immigration.
  • Not only did immigration boost job growth, the authors of that report found, it also pushed up consumer spending by about 0.2 percentage points and drove a small increase in real GDP.

The big picture: The increase in immigration that began in 2022 also played a crucial role in alleviating the worker shortages plaguing the economy back then — particularly in industries like leisure and hospitality, per an analysis from the Kansas City Fed.

  • All that immigration also slowed wage growth in some sectors, like construction and manufacturing, per the analysis — something immigration opponents point to as a reason to curb the flow across the border.
  • On the flip side: Cooling wage growth helped slow inflation.

What they're saying: If the order succeeds in reducing the number of people coming into the U.S., that could push down the monthly job growth numbers over time, says Steve Englander, head of G10 Fx Research at Standard Chartered.

  • But that's a big if. The rule is expected to face court challenges.
  • "Even if the executive order is implemented exactly as written, we're not going to see this in any appreciable way in aggregate economic data for the next handful of months," says Wendy Edelberg, a senior fellow at Brookings who coauthored its analysis.

A White House official pointed out that the administration has "repeatedly made clear that reforming our immigration system would strengthen our economy, boost our labor supply, and help solve workforce shortages that some businesses are facing."

What to watch: The May jobs report is due out Friday morning, and economists expect it will show that the U.S. added another 180,000 jobs.

  • Whatever the report finds, one thing is clear — a lot of those added jobs are being done by recent immigrants.
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