Immigration is boosting the U.S. economy and has been ‘really underestimated,’ says JPMorgan research head


The lowest-paid workers in the U.S. economy have seen their wages surge in the past four years, outpacing gains for any other group of earners, according to a new report from the Economic Policy Institute — but their wages remain “grossly inadequate.”

Real wages of the lowest-paid workers grew 12.1% between 2019 and 2023, researchers at the left-leaning think tank found, surging faster than the wages of any other group of earners. That number is adjusted for inflation. 

The trend is “a notable reversal of fortune for lower-wage workers in the U.S. labor market,” researchers wrote in the report, released Thursday. 

Those gains were driven by state-level minimum-wage increases, pandemic-era stimulus payments, and a tight labor market, researchers wrote. Wages grew particularly fast for Black men, young workers, and working mothers.

Despite the “exceptional” wage increases, the country’s lowest-paid workers still don’t earn enough to meet most families’ basic needs, the report said.

“Low-wage workers are still not paid enough to make ends meet,” senior economist Elise Gould said in a statement. “Policymakers need to strengthen labor standards so that workers can lock in the gains made and continue to build on them, even in weaker labor markets.” 

Is the gap between lower- and higher-paid workers shrinking? 

The EPI report is the latest piece of research showing surprising gains for low-wage workers throughout the pandemic. 

working paper distributed by the National Bureau of Economic Research last year found that the gap between lower- and higher-paid workers grew smaller following the height of the pandemic. That was partly because lower-paid workers switched jobs more often, researchers found and earned higher wages as a result.

“Labor-market tightness is really what drives these gains,” said Annie McGrew, an economist at the University of Massachusetts Amherst and one of the paper’s co-authors.

Millions of low-paying jobs disappeared overnight at the outset of the pandemic when hotels, restaurants, and other businesses shut down. But as the economy recovered, those industries quickly bounced back, and employers struggled to find enough staff to keep up with demand. 

That gave workers more leverage and created competition among employers — which, in turn, helped boost pay, even in notoriously low-paying industries like fast food. 

The labor-market tightness and ensuing wage gains represented “a profound shift in U.S. labor-market conditions,” the authors of the NBER paper wrote. 

Some sectors with a large share of lower-paying jobs, particularly leisure and hospitality, have continued to add jobs over the last year despite a slowdown in hiring for some other industries. 

Even “exceptional” wage gains aren’t enough to ensure financial security for the country’s lowest-wage workers, the EPI report said. That 12.1% real wage increase over the last several years translated to the lowest-earning 10% of workers making less than $13.52 an hour, or an annual salary of $28,120. 

For a family of four, that falls below the federal poverty level. 

The research shows that certain low-wage workers — particularly those that switched jobs — are better off than before the COVID-19 pandemic, McGrew said.

“But wages are only one dimension of your well-being,” she added. “Even if you’re better than you were compared to pre pandemic, you might still really be struggling.” 

America is in a funk, and no one seems to know why. Unemployment rates are lower than they’ve been in half a century and the stock market is sky-high, but poll after poll shows that voters are disgruntled. President Joe Biden’s approval rating has been hovering in the high 30s. Americans’ satisfaction with their personal lives—a measure that usually dips in times of economic uncertainty—is at a near-record low, according to Gallup polling. And nearly half of Americans surveyed in January said they were worse off than three years prior.

Experts have struggled to find a convincing explanation for this era of bad feelings. Maybe it’s the spate of inflation over the past couple of years, the immigration crisis at the border, or the brutal wars in Ukraine and Gaza. But even the people who claim to make sense of the political world acknowledge that these rational factors can’t fully account for America’s national malaise. We believe that’s because they’re overlooking a crucial factor.

Four years ago, the country was brought to its knees by a world-historic disaster. COVID-19 hospitalized nearly 7 million Americans and killed more than a million; it’s still killing hundreds each week. It shut down schools and forced people into social isolation. Almost overnight, most of the country was thrown into a state of high anxiety—then, soon enough, grief and mourning. But the country has not come together to sufficiently acknowledge the tragedy it endured. As clinical psychiatrists, we see the effects of such emotional turmoil every day, and we know that when it’s not properly processed, it can result in a general sense of unhappiness and anger—exactly the negative emotional state that might lead a nation to misperceive its fortunes.

The pressure to simply move on from the horrors of 2020 is strong. Who wouldn’t love to awaken from that nightmare and pretend it never happened? Besides, humans have a knack for sanitizing our most painful memories. In a 2009 study, participants did a remarkably poor job of remembering how they felt in the days after the 9/11 attacks, likely because those memories were filtered through their current emotional state. Likewise, a study published in Nature last year found that people’s recall of the severity of the 2020 COVID threat was biased by their attitudes toward vaccines months or years later.

When faced with an overwhelming and painful reality like COVID, forgetting can be useful—even, to a degree, healthy. It allows people to temporarily put aside their fear and distress, and focus on the pleasures and demands of everyday life, which restores a sense of control. That way, their losses do not define them, but instead become manageable.

But consigning painful memories to the River Lethe also has clear drawbacks, especially as the months and years go by. Ignoring such experiences robs one of the opportunity to learn from them. In addition, negating painful memories and trying to proceed as if everything is normal contorts one’s emotional life and results in untoward effects. Researchers and clinicians working with combat veterans have shown how avoiding thinking or talking about an overwhelming and painful event can lead to free-floating sadness and anger, all of which can become attached to present circumstances. For example, if you met your old friend, a war veteran, at a café and accidentally knocked his coffee over, then he turned red and screamed at you, you’d understand that the mishap alone couldn’t be the reason for his outburst. No one could be that upset about spilled coffee—the real root of such rage must lie elsewhere. In this case, it might be untreated PTSD, which is characterized by a strong startle response and heightened emotional reactivity.

We are not suggesting that the entire country has PTSD from COVID. In fact, the majority of people who are exposed to trauma do not go on to exhibit the symptoms of PTSD. But that doesn’t mean they aren’t deeply affected. In our lifetime, COVID posed an unprecedented threat in both its overwhelming scope and severity; it left most Americans unable to protect themselves and, at times, at a loss to comprehend what was happening. That meets the clinical definition of trauma: an overwhelming experience in which you are threatened with serious physical or psychological harm.

Traumatic memories are notable for how they alter the ways people recall the past and consider the future. A recent brain-imaging study showed that when people with a history of trauma were prompted to return to those horrific events, a part of the brain that is normally employed when one thinks about oneself in the present. In other words, the study suggests that the traumatic memory, when retrieved, came forth as if it were being relived during the study. Traumatic memory doesn’t feel like a historical event, but returns in an eternal present, disconnected from its origin, leaving its bearer searching for an explanation. And right on cue, everyday life offers plenty of unpleasant things to blame for those feelings—errant friends, the price of groceries, or the leadership of the country.

To come to terms with a traumatic experience, as clinicians know, you need to do more than ignore or simply recall it. Rather, you must rework the disconnected memory into a context, and thereby move it firmly into the past. It helps to have a narrative that makes sense of when, how, and why something transpired. For example, if you were mugged on a dark street and became fearful of the night, your therapist might suggest that you connect your general dread with the specifics of your assault. Then your terror would make sense and be restricted to that limited situation. Afterward, the more you ventured out in the dark, perhaps avoiding the dangerous block where you were jumped, the more you would form new, safe memories that would then serve to mitigate your anxiety.

Many people don’t regularly recall the details of the early pandemic—how walking down a crowded street inspired terror, how sirens wailed like clockwork in cities, or how one had to worry about inadvertently killing grandparents when visiting them. But the feelings that that experience ignited are still very much alive. This can make it difficult to rationally assess the state of our lives and our country.

One remedy is for leaders to encourage remembrance while providing accurate and trustworthy information about both the past and the present. In the early days of the pandemic, President Donald Trump mishandled the crisis and peddled misinformation about COVID-19. But with 2020 a traumatic blur, Trump seems to have become the beneficiary of our collective amnesia, and Biden the repository for lingering emotional discontent. Some of that misattribution could be addressed by returning to the shattering events of the past four years and remembering what Americans went through. This process of recall is emotionally cathartic, and if it’s done right, it can even help to replace distorted memories with more accurate ones.

President Biden invited the nation to grieve together in 2021, when American death counts reached 500,000, and again in 2022 when they surpassed 1 million. In his 2022 State of the Union address, he rightly acknowledged that “we meet tonight in an America that has lived through two of the hardest years this nation has ever faced,” before urging Americans to “move forward safely.” But in the past two years, he, like almost everyone else, has largely tried to proceed as if everyone is back to normal. Meanwhile, American minds and hearts simply aren’t ready—whether we realize it or not.

Perhaps Biden and his advisers fear that reminding voters of such a dark time would create more trouble for his presidency. And yet, our work leads us to believe that the effect would be exactly the opposite. Rituals of mourning and remembrance help people come together and share in their grief so that they can return more clear-eyed to face daily life. By prompting Americans to remember what we endured together, paradoxically, Biden could help free all of us to more fully experience the present.

The recent surge in immigration into the U.S. is helping to bolster the economy despite a raft of global challenges, according to Joyce Chang, chair of global research at JPMorgan.

The U.S. Federal Reserve on Wednesday raised its U.S. GDP growth projection to 2.1% for 2024, up from 1.4% in its December outlook, as the economy continues to display resilience despite high-interest rates as the central bank seeks to manage inflation levels.

Meanwhile, the labor market has stayed relatively hot despite tighter monetary conditions, with unemployment remaining below 4% in February and the economy adding 275,000 jobs.

The Fed also raised its projections for its preferred measure of inflation: core personal consumption expenditure. It now expects the core PCE to come in at 2.6%, up from 2.4%, after January and February inflation prints dampened hopes that price increases were fully under control.

The core consumer price index, which excludes volatile food and energy prices, rose 0.4% in February on the month and was up 3.8% on the year, slightly higher than forecast.

“We are still seeing the phenomena around the globe that services inflation is still well above where it was before the pandemic, so we’re looking at 3% for core CPI, but I think one thing that was really underestimated in the U.S. was the immigration story,” Chang told CNBC’s “Squawk Box Europe” on Thursday.

“The U.S. population is almost 6 million higher than it was two years ago or so, and so that has accounted for a lot of the increase in consumption when you see the very low unemployment numbers as well.”

JPMorgan research boss explains how immigration is changing the U.S. economic outlook
JPMorgan research boss explains how immigration is changing the U.S. economic outlook

She noted that upward pressure on wages and housing costs, along with a resurgence in energy prices so far this year, suggest that the Fed is “not out of the woods yet” when it comes to inflation.

A recent Congressional Budget Office report estimated that net immigration to the U.S. was 3.3 million in 2023 and is projected to remain at that level in 2024, before dropping to 2.6 million in 2025 and 1.8 million in 2026.

Immigration, and particularly border crossings, is among the hottest topics in the run-up to the November presidential election. Chang suggested that other events could exacerbate the issue, particularly the unfolding situation in Haiti.

However, she argued that in terms of net impact on the economy, immigration is “a good thing.”

“From everything that we have seen, the revenues that are generated exceed the expenses. Now it is a political issue, not just here in the U.S. but you look at Europe, it’s also probably the No. 1 issue right now, but we do think that when you look at the unemployment numbers, the strength of consumption, the immigration was a big part of that,” Chang said.

Vanguard economist says Fed to keep interest rates on hold for the rest of the year
Vanguard says Fed to keep interest rates on hold for the rest of the year

Other factors that have enabled the U.S. economy to outperform its peers include its high fiscal deficit and its energy independence, Chang added. Europe has struggled in recent years to eradicate its reliance on Russia for energy supply.

Meanwhile, the Congressional Budget Office projects that the U.S. federal budget deficit totaled $1.4 trillion in 2023, or 5.3% of GDP, which will swell to 6.1% of GDP in 2024 and 2025.

“I think that also in an election year, you’re going to see a lot of spending before Sept. 30 as well, so there aren’t really many signs that those numbers [will subside]. I think that’s one reason why I do think that higher for longer will be here to stay,” Chang added. Sept. 30 is the end of the U.S. government’s fiscal year.

With this in mind, JPMorgan sees only a “shallow” loosening cycle from the Federal Reserve, with inflationary pressures set to persist against the backdrop of high government spending and immigration.

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