Immigration has been robust over the past two years, creating a flood of potential workers that is both supercharging the job market and leading to surprises and quirks in closely watched economic data.
The Congressional Budget Office estimates that net immigration will total about 3.3 million people this year, matching the 2023 number and far exceeding the 900,000 that was normal before the pandemic.
The jump has come as legal migration and border apprehensions surge, and while the jump in immigration is politically contentious, the resulting pop in population is also fueling strong hiring.
Economists think that as immigration adds to the labor supply, job growth can remain strong without overheating the economy. A Brookings Institution analysis recently estimated that employers could add 160,000 to 200,000 jobs per month this year without a big risk of wages spiking and inflation rising. Without all of the immigration, that would have been more like 60,000 to 100,000.
But because immigration flows are uncertain, estimates of that “break even” employment level vary widely. Goldman Sachs puts it at 125,000, while economists at Morgan Stanley think it could be as high as 265,000.
And immigration may help to explain a recent data mystery: a big gap between two primary employment measures.
Each month, the government releases employment figures based on two surveys. The “establishment survey,” compiling data from businesses and government agencies, is used to measure overall job gains. A second measure, drawing on surveys of households and Census Bureau population estimates, is the basis for the unemployment rate and for most demographic information.
Hiring has surged in recent months in the establishment survey even as the household survey has shown it falling. Such a huge divergence is unusual, and it has left analysts scrambling to figure out which survey is giving a reliable read.
Immigration could be behind at least some of the divide. Companies typically report hiring workers of all types, including immigrants, in real time. That explains the strong job gains in the establishment survey. Census estimates, on the other hand, are likely to pick up the recent surge in immigration only with a delay.
For the household survey, “the immigration data that feed into the estimate lag by a year and a half,” Morgan Stanley economists wrote. “In contrast, we think the payroll survey is probably closer to correct.”
