Immigrants help keep job growth high as inflation cools

Immigration — both authorized and unauthorized — has helped the U.S. job market sustain a fiery run in recent months without reigniting inflation, economists and analysts say. The effect has been a favorable, though uncertain, situation for President Joe Biden ahead of the November election.

A blockbuster May jobs report showed that the U.S. economy added 272,000 jobs last month, well above the Dow Jones’ forecast of 190,000. Meanwhile, the Bureau of Labor Statistics reported last week that consumer prices in May remained unchanged, and even fell slightly on an annual basis.

This dynamic — a heating job market and cooling inflation — is in part the result of increased inflows of immigrants.

“Recent immigrants have flowed disproportionately into the parts of the labor force that were particularly tight in 2022, contributing to labor supply in places where it was most badly needed,” Goldman Sachs analysts wrote in a note to clients in May.

The May jobs report found that government, leisure and hospitality, and health-care sectors saw the most growth.

“The immigration surge poses lots of challenges to communities across the country, but it came at a very fortuitous time to help ease the labor market pressure, when the Fed was working hard to do it by interest rate hikes,” Moody’s Chief Economist Mark Zandi told CNBC.

Typically, a hot labor market walks a tightrope that could easily collapse into reheated inflation.

That is because higher job gains risk depleting the labor supply. This forces businesses to raise wages to compete for workers, which increases producers’ costs and eventually ripples into higher consumer prices and inflation.

But recent spikes in immigration at the southern border and elsewhere in the U.S. have helped keep the labor pool full even as job gains kept apace.

“We’ve seen labor force supply come up quite a bit, through immigration, through recovering participation,” Federal Reserve Chair Jerome Powell said last Wednesday at the central bank’s press conference following its widely expected decision to keep interest rates flat.

Zandi also credited immigration with helping the United States maintain a positive GDP. “It has reduced the need for more rate hikes, and probably has been critical to ensuring that the economy has avoided a recession,” he said.

While Biden’s critics have focused on the high-profile political liabilities of the humanitarian crisis caused by migration spikes at the southern border, the picture that economists paint of immigration is very different.

They say immigrants may be safeguarding the U.S. economic recovery.

In recent years, higher immigration inflows have effectively doubled the number of…