A recent Congressional Budget Office report that estimates higher population growth than the Census Bureau is getting economists to revisit the issue of how immigration, both legal and illegal, is impacting the economy.
Related: Immigration may answer two big mysteries of the U.S. economy
Steve Englander, head of North America macro strategy at Standard Chartered, has drilled specifically into one issue: the difference in jobs growth between the nonfarm payrolls data, which surveys employers, and the household report, which surveys workers.
While the household report is more volatile than the establishment survey, over a longer period the two reports should have little difference. But right now, they do. Over the past year, nonfarm payrolls have grown by 2.9 million, while the household survey adjusted to match how the payrolls report counts jobs has only risen by 1.1 million.
He says a surge in immigration may be behind the upward surprises to payrolls. The CBO says 3.3 million immigrants arrived in 2023, of which 2.5 million were undocumented or overstayed visas.
It may come as a surprise that companies would report hiring undocumented immigrants to the government, but Englander notes some programs allow some to work legally without Social Security numbers.
Workers are allowed to be employed while their Social Security applications are pending, and asylum applicants or recent parolees are eligible for employment authorization documents. In addition, some employees may use fake or borrowed numbers, Englander says.
“We have not seen an estimate of how many such workers are captured in [nonfarm payrolls], but it would not take a high percentage to add meaningfully to monthly job changes,” he said.
By contrast, undocumented immigrants may be reluctant to respond to a government survey, even one that is confidential.
The industry breakdown of jobs growth also suggests a strong immigration impact — employment in construction, healthcare and social assistance, food manufacturing, accommodation and food services, and personal service sectors grew 3.3% year-over-year, compared to 0.9% growth in other sectors. “So strong overall employment gains are concentrated in segments with heavy immigrant composition,” he said.
Englander also tackled another mystery: the low level of initial jobless claims. “The much commented-on low level of initial claims may mean that a growing share of workers are ineligible for unemployment benefits, but the high ratio of continuing to initial claims could indicate that job losers are now having greater difficulty finding jobs,” Englander said.
It also can explain why productivity seems to be rising. “If some undocumented immigrants work outside the formal BLS job counting framework, their output may be captured in economic data, but their labor input may be missed,” said Englander.
What he calls a labor supply shock will likely weaken the U.S. dollar, but on a slow trajectory, he said.