How Biden's border restrictions could affect the labor market

The strong job growth of the past few years has been driven in large part by immigration. However, the Biden administration is now looking to curb migrants' entry into the country. This move matters because the strength in the job market has helped underpin a surprisingly strong economy, even as the Federal Reserve has implemented historic interest rate hikes. 

The big question now is whether the new border restrictions will slow either the job market or the economy overall. If it does, the impacts will likely take time to fully manifest, likely extending past the next election.

Much of the recent job growth has come from lawful immigration, and the administration's actions won't impact that. But about half of the non-farm payroll job growth since October 2023 has come from asylum-seekers, refugees and other migrants who have been authorized to work in the U.S. Excluding these migrants, job growth would have been around 125,000 per month on average, rather than the 231,000 seen.

Migrants comprised one-third of the monthly jobs numbers in the 12 months before the recent policy changes. However, a large percentage have entered the U.S. legally and wouldn't be impacted by the new executive order.

The increase in immigration that began in 2022 also played a crucial role in alleviating worker shortages, particularly in industries like leisure and hospitality. This immigration also helped slow wage growth in some sectors, which in turn helped slow inflation.

If the new executive order succeeds in reducing the number of people coming into the U.S., that could push down the monthly job growth numbers over time. But the order is expected to face court challenges, and its impacts may not be seen in the aggregate economic data for several months.

The White House has argued that reforming the immigration system would strengthen the economy, boost the labor supply, and help solve workforce shortages. The May jobs report will provide the latest snapshot, but it's clear that many of the added jobs in recent years have been done by recent immigrants. 

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