The 'hot' and 'cold' of immigration data are stirring between optimistic and pessimistic expectations for the US economy.
Recently, President Biden announced an executive action aimed at significantly restricting illegal immigration. Specifically, the policy states that when the daily average number of illegal entries through the US-Mexico border entry ports reaches 2,500 people within one week, it will close the shelter applications for illegal immigrants on the US-Mexico border, and illegal border-crossing immigrants who are caught may be quickly deported or repatriated to Mexico. Only when this figure drops to 1,500 will it reopen.
In a recent report, Morgan Stanley analyst Sam D Coffin said that if the 'new policy' is effectively implemented, analysts expect the total number of immigrants to drop by nearly half, labor market supply may sharply tighten, and GDP growth may also sharply slow down.
Biden's immigration regulations, if effective, may greatly restrict labor supply.
Coffin believes that if the 'new policy' is effectively implemented, the total number of immigrants will drop from 3.3 million in 2023 to 1.8 million per year, which will cause the labor market supply to sharply tighten:
In our mid-year outlook, we estimate that the 3.3 million immigrants (providing labor) in 2024 will match the monthly increase of 265,000 new jobs, and the 2.6 million immigrants in 2025 will match the monthly increase of 210,000 new jobs.
On the contrary, if the number of immigrants drops to 1.8 million, the labor market will only not tighten when the added number of new jobs increases by about 160,000 per month.
At the same time, Coffin also predicts that if the 'new policy' is effectively implemented, the actual GDP growth rate is expected to slow down by 0.3 percentage points:
If immigration slows in line with new policies, it may subtract about 0.3 percentage points from our (actual GDP) growth estimate.
Monthly border crosser data will become a key monitoring indicator.
Recent changes in immigration data are influencing US economic expectations. On the one hand, since the beginning of the year, upward adjustments of immigration data have driven up employment and GDP growth expectations significantly; on the other hand, the Biden new policy casts a shadow over optimistic expectations.
Market closely monitors border monthly data for the effect of Biden's 'new policy' - recent illegal immigration data in March and April has shown a downward trend, which may indicate that immigration policies are quietly tightening. Coffin wrote in the report:
'In the six months before February, the Customs and Border Protection agency reported that the number of illegal immigrants 'encountered' at entry ports had increased by 10-20% from the previous year.
But in March and April, the number was lower than the same period last year. Mexico seems to have been blocking more immigrants from entering the United States from Mexico, and it has been reported that Mexico uses buses to transport immigrants from the US border. The number of people who immigrate from the south to Mexico continues to rise.
The report points out that over the past year, US employment has grown an average of 250,000 per month, far exceeding the monthly increase of about 100,000 brought about by population growth. This data has raised doubts of overestimation.
But analysts believe that this is precisely one of the few employment indicators that reflects the number of jobless immigrants:
We hold the opposite view: this is currently one of the few employment indicators that may reflect the number of undocumented immigrants.
We hold opposing views: this is one of the few employment indicators that may currently reflect the inflow of undocumented immigrants.
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