Within the Fed’s current examination of the differential restoration within the US as in comparison with the Euro space, UK and Canada, I used to be stunned that immigration didn’t make a much bigger look, given my views.
The KC Fed has simply offered some insights into how immigration helped enhance slack within the labor market (h/t Torsten Slok).
Supply: Cohen/KC Fed (2024).
Deutsche Financial institution has taken a stab at assessing the influence of immigration on inflation by reference to a counterfactual.
Jim Reid at DB writes:
The conclusion [of Justin Weidner’s piece]: the labor market would have been considerably tighter if not for the uptick in immigration. A tighter labor market within the absence of immigration would have led to greater inflation. Utilizing two inflation fashions, our economists discover that core PCE inflation doubtless would have been 25-50bps greater (see second chart under), although they admit to significant uncertainty round these estimates. Immigration was clearly not the one disinflationary power for the US financial system over the previous yr – to make sure, core PCE inflation fell 200bps in 2023 – however it was an necessary contributing issue
For an earlier dialogue of labor power dynamics and immigration, see Edelberg and Watson (March 2024), and the long term implications in CBO (2024).
