In recent times, the United States has experienced a significant increase in immigration, which has had a positive impact on the country’s economy. Joyce Chang, chair of global research at JPMorgan, highlighted the role of immigration in bolstering the economy amid global challenges. The Federal Reserve has raised its GDP growth projection for 2024 to 2.1%, indicating the resilience of the economy despite high interest rates. This growth is attributed to the increase in consumption driven by the rise in the U.S. population, which has grown by almost 6 million over the past two years. The influx of immigrants has contributed to the low unemployment rate, with the economy adding 275,000 jobs in February.
The Federal Reserve also adjusted its projections for inflation, expecting core PCE to reach 2.6%, up from 2.4%. This increase in inflation is partly due to upward pressure on wages and housing costs, as well as a resurgence in energy prices. Despite these inflationary pressures, the Fed remains vigilant in managing inflation levels to ensure economic stability. The recent data on core consumer price index shows a 0.4% increase in February and a 3.8% rise year-over-year, slightly higher than expected. The Fed’s stance on monetary policy reflects the need to balance economic growth with inflation control.
Immigration, particularly border crossings, has become a contentious issue in the political landscape, especially amidst the upcoming presidential election. The Congressional Budget Office estimated net immigration to the U.S. at 3.3 million in 2023, with projections expected to decrease in the following years. Despite the political debate surrounding immigration, Chang emphasized that the overall impact on the economy is positive. She mentioned that the revenues generated from immigration exceed the expenses, leading to increased consumption and lower unemployment levels. Immigration has been a crucial factor in sustaining the strength of the U.S. economy compared to its peers.
In addition to immigration, other factors have played a role in the outperformance of the U.S. economy. Chang highlighted the high fiscal deficit and energy independence as key contributors to the country’s economic strength. Unlike Europe, which relies heavily on Russia for energy supply, the U.S. has managed to secure its energy independence. The Congressional Budget Office projects a federal budget deficit of $1.4 trillion in 2023, which is expected to increase in the coming years. Chang emphasized the continuous government spending leading up to the election, indicating that inflationary pressures are likely to persist.
Looking ahead, JPMorgan predicts a “shallow” loosening cycle from the Federal Reserve, anticipating that inflationary pressures will continue amidst high government spending and immigration. The impact of immigration on the economy is expected to remain significant, despite ongoing political debates. The strength of consumption and low unemployment rates are attributed to the role of immigration in driving economic growth. As the U.S. navigates through global challenges, the influx of immigrants provides a valuable source of labor and consumption, contributing to the overall resilience of the economy.