Immigration Impact: Europe is shrinking economically, while the U.S. faces rising unemployment partly due to an influx of immigrants, who can also help boost demand. Economists generally support immigration as beneficial for the economy, but accurately measuring its impact is difficult due to undocumented workers.
As America and China grow economically, Europe is under pressure to boost its competitiveness. While job creation in the U.S. is around 100,000 per month, this may not be enough to keep unemployment from rising due to a growing labor force, including many immigrants. Jay Powell suggests that an influx of people increases the labor force, potentially raising unemployment rates. However, many migrants find jobs, contributing to demand in the economy. Economists generally view immigration positively, recognizing that it brings in both labor and demand. Understanding the full impact of immigration on the economy involves accurately measuring arrivals, job status, and overall labor market conditions, which is challenging due to the presence of undocumented immigrants.
Migrant Surge: A significant increase in migrants, from 1 million to 3.3 million, may raise the labor force and contribute to reducing inflation, despite the challenges in accurately measuring their impact.
Recent data has shown a significant increase in the number of migrants entering the U.S., going from an original estimate of 1 million to about 3.3 million in just one year. This influx has the potential to slightly increase the labor force. Although these new immigrants might have a lower employment rate, their arrival plays a role in balancing the economy. With many economic activities demanding more workers, this surge is believed to have contributed to reducing inflation as more people are available to meet the rising needs for goods and services. However, it is challenging to accurately measure the impact of immigration on the job market, as existing surveys do not directly capture foreign worker status. Therefore, while their presence affects labor dynamics, the complete picture remains unclear due to varying reporting practices among employers and inconsistencies in data collection.
Labor Market Dynamics: Immigration has helped stabilize the U.S. job market and control inflation, but the challenge remains in ensuring fair wages for all workers. Recent job growth suggests a cooler labor market, with the economy needing more job additions to maintain stability.
Immigration has played a significant role in stabilizing the U.S. job market while helping to keep inflation in check. As more workers entered the labor force, the pressure from wage competition eased, preventing the common wage-price spiral. However, challenges exist, especially concerning job quality and wages for undocumented workers. Recent estimates suggest that the economy now needs about 230,000 new jobs each month to maintain stability, but recent job additions fall short, indicating a cooling labor market. This shift in immigration patterns has made measuring employment more complicated, yet it's clear that without these new workers, the economy could have faced higher inflation and potential recession. The Fed's interest rate adjustments reflect this understanding as they grapple with balancing employment growth while avoiding excessive inflation, navigating an ever-evolving labor landscape.
Immigration's Impact: Immigration trends influence job markets and inflation. A decrease in immigration could lead to inflation if job growth doesn't match it. While the Fed avoids political discussions, longer-term benefits from migrants’ families may stabilize the economy, though short-term inflation predictions are uncertain.
The current immigration trend is a hot topic affecting economic factors like job numbers and inflation. Although the recent surge in immigration is decreasing, it still remains above historical averages. This continuous influx helps keep wages down, providing relief from inflationary pressures. However, if immigration slows, we could see an inflation resurgence unless economic activity picks up. The Fed is cautious about this politically sensitive issue, as they want to maintain independence from political debates. In the long-term, the children of migrants could contribute to workforce growth, helping stabilize the economy in the future. Nevertheless, the short-term effects on inflation are uncertain, depending on various economic conditions.
China's Economic Stimulus: China's recent market stimulus efforts may offer temporary relief to the stock market, but deep economic issues, particularly in housing, could hinder lasting improvements. Unless more focused fiscal measures are implemented, skepticism about the effectiveness of these initiatives remains high.
Recent attempts by the People's Bank of China to stimulate the stock market through a special fund of about $100 billion USD for asset managers have raised skepticism. These efforts might provide a temporary boost, but with a struggling economy and a crumbling housing market, many doubt the long-term effectiveness. Even if the stock market experiences a slight increase due to these measures, fundamental issues in the economy remain. Analysts also express caution, as the Chinese government's focus on monetary stimulus without concrete fiscal actions leaves many unanswered questions about future growth. President Xi's recent pledge to issue government bonds could signal a shift toward more impactful fiscal stimulation, which may help revitalize the economy, but until specific plans are confirmed, uncertainty remains regarding the actual outcomes. Concerns persist about whether this stimulus approach will genuinely address the deeper challenges facing China's economy.
Immigration and unemployment
Unhedged
137 Episodes
Recent Episodes from Unhedged
Markets and the Middle East
As the conflict in the Middle East expands to include Lebanon and Iran, markets are responding with surprising nonchalance. Why? And will that last? Today on the show, Katie Martin and capital markets correspondent Nick Megaw try to understand why so much can go wrong in one part of the world, without roiling markets in the rest of the world. Also, we go long the Vix, and short e-cycles.
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Is the China stimulus package enough?
Last week China announced it would be providing low-cost funds to investors in both equities and the property market. The nominal effects were immediate, and the country’s stock market has recently risen as much as 20 per cent. Boosting stock prices is one thing, but there is a bigger problem: can Beijing encourage more domestic spending, and less saving? Today on the show, Katie Martin discusses all this with the Unhedged newsletter's newest writer, Aiden Reiter, who, it turns out, speaks Mandarin. Also we go long morning swims and long our own show.
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Immigration and unemployment
When discussing the economy after the interest rate cuts last week, chair of the US Federal Reserve Jay Powell made an interesting comment about jobs numbers and immigration. “If you are having millions of people come into the labour force, and you are creating 100,000 jobs, you’re going to see unemployment go up,” he said. Well, mostly. Today on the show, the entire staff of the Unhedged newsletter – Rob Armstrong and Aiden Reiter – get together to discuss how immigration might be affecting unemployment. Also, they go long and short China’s new stimulus programmes.
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Read a transcript of this episode on FT.com
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The case for small and mid caps
As the Federal Reserve starts to lower interest rates, a perennial theory has returned: that small and mid caps will, for a time, grow more quickly than the S&P 500. Today on the show, Katie Martin, Rob Armstrong, and Aiden Reiter discuss whether that is good, or even true. Also, as the seasons change, we go long and short knitwear.
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Read a transcript of this episode on FT.com
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Federal Reserve puts on enormous party hat
In a massive surprise on Wednesday, one of Rob Armstrong’s predictions turned out to be right. The Fed did indeed cut interest rates by half a percentage point. A cut this big is deeply unusual, and normally happens in a crisis. But there are a lot of reasons to think we’re not in a crisis at all. Today on the show, Katie Martin and Rob Armstrong talk about what the Fed just did, and where the central bank is headed. Also, we go long European merger drama and short well-being at big banks.
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What is Apollo, anyway?
Apollo Global Management is publicly traded and one of the largest alternative asset managers in the world. But what does it really do? Today on the show, Rob Armstrong asks reporters Sujeet Indap and Eric Platt to describe the parts that make up Apollo. Also they go long Boeing and long News Corp.
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Read a transcript of this episode on FT.com
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How Ireland got too much money
Forty years ago Ireland had a high number of emigrants and very few multinational corporations. Then it became a tax haven. Today, the country is the headquarters for the European arms of companies such as Apple, Google and Intel. The country also has an €8bn surplus, and is about to get €13bn more following a court ruling with the iPhone maker. Today on the show, Katie Martin and Irish economist David McWilliams try to figure out what Ireland should do with all this extra cash. Also they go short Trump Media and long the Netflix series, The Perfect Couple.
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Read a transcript of this episode on FT.com
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The Fed: will it be 25 or 50?
Will the US central bank lower interest rates by 25 or 50 basis points? Fed chair Jay Powell has hinted rates are coming down, but not by how much. Today on the show, Katie Martin and Rob Armstrong take sides and argue the case for the expected 25 basis point cut, and a larger 50 basis point cut. Also we short Apple’s new phone, and go long the amazing technology of the veterinarian.
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How to fix the housing market
By many measures, the US housing market is broken. High demand is causing high prices, and yet, year after year, new supply fails to arrive. What’s behind the mismatch? And is there any way to solve it? Today on the show, Robert Armstrong and Aiden Reiter discuss proposals from the two US presidential candidates, and other ideas. Also, we go short Turkey and short the yield curve.
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Boring but sexy (stocks)
The run-up in the markets over the past year or so has been largely driven by tech companies with outsized returns. But that seems to be changing. Names such as Walmart, Berkshire Hathaway and UnitedHealthCare have been performing strongly while the once-hot tech sector seems to lag. Today on the show, Katie Martin and Rob Armstrong ask if this is a sign of an era shift in the market. Also we ask if Jerome Powell was lucky or good.
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