New immigration estimates help make sense of the pace of employment | Brookings (2024)

Research

Wendy Edelberg and

Wendy Edelberg Director - The Hamilton Project, Senior Fellow - Economic Studies @WendyEdelberg

Tara Watson

Tara Watson Director - Center for Economic Security and Opportunity, Senior Fellow - Economic Studies @taraelizwatson

March 7, 2024

Key takeaways:

  • This analysis considers the macroeconomic implications of recent estimates of immigration flows.
  • Recent immigration flows are notably higher than previous projections. New numbers from the Congressional Budget Office suggest that 3.3 million net immigrants arrived in 2023 compared to the 1.0 million projected prior to the pandemic.
  • Higher immigration rates mean that employment growth does not need to slow significantly to get the labor market to a sustainable pace: The authors estimate that the labor market in 2023 could accommodate employment growth of 160,000 to 230,000—versus previous projections of 60,000 to 130,000—without adding pressure to wages and price inflation.
  • The uptick can also help to explain the surprising strength in consumer spending and overall economic growth since 2022.
New immigration estimates help make sense of the pace of employment | Brookings (3)
  • 3 min read

In this analysis, we consider recent immigration flows and their potential macroeconomic implications. Interpreting the current labor market requires understanding recent immigration: how many people arrived and how they engaged in the economy. Recent estimates from the Congressional Budget Office (CBO) suggest much higher rates of recent immigration than were previously projected. In 2019, CBO projected that net immigration in 2023 would total 1.0 million people; Now, the agency estimates that net immigration last year was 3.3 million. Moreover, we estimate that CBO’s current immigration estimates suggest faster population and labor force growth in recent years than currently reported by the Bureau of Labor Statistics (BLS) using Census population estimates.

Prior to the pandemic, the range of population and labor force participation projections from CBO, the BLS, and the Social Security Administration (SSA) suggested that sustainable employment growth (that which did not put unwelcome pressure on inflation) would be between 60,000 and 140,000 per month in 2022 and, as more people retired, fall to between 60,000 and 100,000 per month by 2024 (table 1). According to the Employment Situation Report from BLS, employment growth in 2023 averaged 255,000 per month, two to four times the pace that had been considered sustainable.

Many observers took this as evidence that the labor market was much too tight and needed to soften significantly in order to get inflation down. But, using the new CBO estimates of net immigration released in January 2024, we estimate that the labor market in 2023 could have sustainably accommodated employment growth of 160,000 to 230,000. That is still below the actual monthly increases in employment in 2023, but far less so than previously estimated. Similarly, for 2024 we estimate sustainable employment growth will be between 160,000 and 200,000, approximately double the sustainable level that would have occurred in absence of the pickup in immigration according to the pre-pandemic projections from CBO, BLS, and SSA.

New immigration estimates help make sense of the pace of employment | Brookings (4)

The unexpectedly high level of immigration also explains some of the surprising strength in consumer spending and overall economic growth since 2022. Moreover, we expect immigration flows to further boost economic growth in 2024.

New immigration estimates help make sense of the pace of employment | Brookings (5)

Although we focus here on the near-term boost to the aggregate economy from greater immigration, the forces we describe are also relevant in the long term. The United Statesis facing a demographic challenge because of lower fertility rates and population aging. Recent Census projections make it clear that the growth of the U.S. population in coming decades will hinge critically on the level of immigration.

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Authors

Wendy Edelberg Director - The Hamilton Project, Senior Fellow - Economic Studies @WendyEdelberg

Tara Watson Director - Center for Economic Security and Opportunity, Senior Fellow - Economic Studies @taraelizwatson

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  • Acknowledgements and disclosures

    Acknowledgements

    We are grateful to Lauren Bauer, Eric Jensen, John Sabelhaus, and Louise Sheiner for their generous feedback. We thank Cameron Greene, Simon Hodson, and Olivia Howard for their excellent research assistance.

    The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment. A list of donors can be found in our annual reports published online here. The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation.

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FAQs

How does immigration affect employment? ›

An often overlooked fact: “Immigrants are not simply workers but consumers.” By increasing the demand for goods and services, immigrants “can lead to more investment, resulting in greater demand for labor and thus increased wages and employment in the economy.” Immigrants may also increase the demand for labor by ...

What is the relationship between increased immigration and labor productivity? ›

The available evidence suggests that immigration leads to more innovation, a better educated workforce, greater occupational specialization, better matching of skills with jobs, and higher overall economic productivity. Immigration also has a net positive effect on combined federal, state, and local budgets.

Why do immigrants struggle to find a job? ›

They struggle to find jobs, face significant language barriers and lack transportation or skills to get them the jobs they need, according to interviews with migrants and their advocates. This occurs even when many companies say they are seeking to fill vacancies in a state with low unemployment.

What percentage of immigrants make up the US workforce? ›

Home / Population and society / Articles / How many immigrants are in the American workforce? Immigrants make up nearly 20% of the US workforce — just over 30 out of 168 million — and participate in the labor force at a higher rate than native-born workers, according to data from the Bureau of Labor Statistics (BLS).

Do immigrants benefit the economy? ›

Many economists suggest that immigrants benefit the U.S. economy in several ways. They take generally undesirable, low-paying but essential jobs that most U.S.-born Americans won't, like caring for children, the sick and the elderly.

Do immigrants get paid less than the minimum wage? ›

Immigrants are substantially overrepresented among workers who are paid the least and are most in need of training to improve their skills and earnings. Nearly half (48 percent) of all immigrant workers earned less than 200 percent of the minimum wage, compared with 32 percent of native workers.

Is it harder for immigrants to get a job? ›

Because of these barriers, immigrants face many challenges, such as retraining, paying high fees for courses or tests, limited course options due to a language barrier, and lacking knowledge of US job application processes. These challenges often prevent immigrants from working high-skilled jobs in the workplace.

Why does the US have a labor shortage? ›

Why are we in a worker shortage? At the height of the pandemic, more than 120,000 businesses temporarily closed, and more than 30 million U.S. workers were unemployed. Since then, job openings have steadily increased while unemployment has slowly declined. In 2023, employers ended up adding 3.1 million jobs.

What state has the most immigrants workers? ›

Which U.S. states and cities have the largest numbers of immigrants? The U.S. states with the most immigrants in 2022 were California (10.4 million), Texas (5.2 million), Florida (4.8 million), New York (4.5 million), and New Jersey (2.2 million).

What are the best states for immigrants? ›

If you're thinking of relocating this year, consider New Hampshire, Wyoming, Virginia, Rhode Island and Wisconsin, which lead the most recent list of the best states to move to, according to immigration law experts Shoreline Immigration.

What group of immigrants are most successful in the US? ›

For example, in the United States, Nigerian-Americans are among the most successful immigrant groups, topping the charts in a wide array of fields.

Does immigration status affect unemployment? ›

Unemployment Insurance Information

To collect Unemployment Insurance benefits, you must: Have a Social Security Number. Show that you were in satisfactory immigration status and authorized to work in the United States when earning the wages you used to establish your claim.

What is the relationship between immigration and unemployment? ›

➢ On average, recent immigrants comprise 3.1 percent of the population in counties with the highest unemployment rates (over 13.4 percent). But recent immigrants account for a higher share of the population (4.6 percent) in counties with the lowest unemployment rates (below 4.8 percent).

Why immigrants might be more vulnerable in the workplace? ›

Migrants are at heightened risk of exploitation and abuse in the workplace due to deceptive recruitment practices, both by employers and intermediaries; frequent lack of social support systems; unfamiliarity with the local culture, language, their rights at work and national labour and migration laws; limited or denied ...

Why are immigrants important to the workforce? ›

Immigrants made up 18.1% of the overall labor force in 2022, a sizable share that has increased in recent years and continues to increase. Because immigrants are more likely to be working age, they help fill gaps in the workforce, particularly in certain critical industries.

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