The US economy is facing a significant challenge: a looming labor supply shock. While the new administration's stance on undocumented immigrants is unclear, the article argues that deportations will likely remain at Obama-era levels.
Ajay Rajadhyaksha is global chair of research at Barclays. Jay Powell delivered a Christmas surprise last month, and it wasn’t the fun kind. However, peeved as investors might be at the Federal Reserve’s flip-flopping, the US economy faces a far bigger and imminent challenge that they mostly seem to be ignoring. For all the new administration’s rhetoric about unshackling the US economy, the supply of workers is set to suddenly slow down, and the economic implications are . . . suboptimal.
We’re not referring to the president-elect’s plan to deport undocumented immigrants. Most estimates suggest that there are 11mn undocumented immigrants in the country. Despite campaign rhetoric, deporting all or most of them — even if the US tried to — is an unsolvable logistical challenge. ICE agents would have to go door to door, community to community, trying to find people who don’t want to be found. State and local authorities would have to co-operate. Other countries would have to agree to take millions back. Congress would have to pass hundreds of billions in new funding for the effort. And businesses up and down the country would complain. For example, a very large percentage of the fruit-pickers in the country are undocumented migrants. Industries as diverse as food processing, construction, hospitality and others would be greatly impacted. The new administration is therefore likely to ultimately soften its stance on deporting undocumented immigrants within the country (in practice if not in rhetoric) Deportations will rise, but likely to the same level as the Obama years, focused on those with criminal records, and should run at an annual rate of 400-500k/year. Even so, the US still faces a looming labour supply shock, and it’s coming from south of the border. Estimating net immigration into the country is not an easy process. The official source for native-born and immigrant workers — the BLS’ Household Survey — is (politely put) inaccurate and fluctuates wildl
IMMIGRATION LABOR SUPPLY ECONOMY POLICY DEPORTATION
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