Last week’s jobs report gave us some signs that, three years into the pandemic, the red-hot labor market is finally starting to cool off. One factor contributing to the persistent labor shortage was a drop in the number of immigrants, who have typically accounted for a major share of labor force growth.
But the flow of immigrants into the U.S. has ramped up over the past year or so, as cross-border restrictions have lifted and as U.S. immigration officials have started to work their way through visa application backlogs.
A few moments during the pandemic have made the link between immigration and the labor market crystal clear, said Dany Bahar with the Brookings Institution.
The first came early on when lots of frontline jobs were held by immigrant workers. “I’m talking here about daycare workers and nurses and doctors but also people packing groceries and making deliveries,” Bahar said.
When the economy started to open back up, he said there was a huge demand for workers in industries that typically rely on immigration, like service, hospitality and child care. But the pool of immigrant workers was suddenly a lot smaller.
If faith is lost in our full faith and creditMay 26, 2023
Why don’t we know when the U.S. will run out of money?May 25, 2023
Atlanta Fed CEO on the debt limit debacle and curbing inflationMay 24, 2023
The number of legal immigrants coming to the U.S. was cut in half between 2019 and 2020, according to Julia Gelatt with the Migration Policy Institute.
“The sharp drop in immigration was a big contributing factor to the tight labor markets we saw,” she said.
And that gap in the labor market led to wage growth, said Giovanni Peri at the University of California Davis. That, in turn, contributed to another of the pandemic’s big economic stories: inflation.
“But the recent rebound of immigrants started helping on that front,” Peri said.
Since border restrictions started to ease, Peri added that U.S. immigration officials have been playing catch-up with a backlog of visa applications, and they’re making some headway.
“A labor market where jobs can be filled more easily because of the inflow of immigrants will generate less inflationary pressures,” he said.
Letting in more immigrant workers could address longer-term shortfalls too, Peri said — but that would require immigration policy to be more closely tied to the needs of the labor market.