inside The Fed recently conducted a review of the differences in recovery between the United States and the Eurozone, the United Kingdom, and Canadato my surprise, given my Opinion.
this Kansas Fed has just provided some insights into how immigration exacerbates labor market slack (h/t Torsten Slok).
source: Cohen/Federal Reserve Bank of Kansas (2024).
Deutsche Bank attempts to assess the impact of immigration on inflation by looking at counterfactuals.
DB's Jim Reid wrote:
in conclusion [of Justin Weidner’s piece]: If it were not for the increase in immigration, the labor market would be even tighter. Without immigration, a tighter labor market would lead to higher inflation. Using two inflation models, our economists find that core PCE inflation is likely to be 25-50 basis points higher (see second chart below), although they acknowledge that there is significant uncertainty surrounding these estimates. Immigration was clearly not the only deflationary force in the U.S. economy over the past year—core PCE inflation fell 200 basis points in 2023, to be sure—but it was an important factor
For an earlier discussion of labor dynamics and immigration, see Edelberg and Watson (March 2024)and the long-term effects of CBO (2024).
