A new report from a regional Federal Reserve finds that waves of immigration have strengthened the U.S. economy while causing little inflation.

The report comes as immigration has become a political flashpoint. Fed Chairman Jerome Powell was asked about it on Tuesday by Republican Senator and possible Trump running mate for this year's presidential election, J.D. Vance. "In the long run, immigration is neutral for inflation; in the short run, it can be helpful because the labor market gets looser and you get more people coming in," Powell said.

Vance's claim that immigration may be driving up housing costs may be true in certain specific markets, but not for the country as a whole.

In contrast, the Dallas Fed report said immigration may have led to a slight increase in inflation, but that the increase was offset by improved output.

The Dallas Fed report analyzed immigration waves using data from the Congressional Budget Office and the Current Population Survey. Dallas Fed economists noted that the Current Population Survey data showed that about 60% of recent immigrants have found jobs.

Economists at the Dallas Fed predict in their modeling that U.S. quarterly GDP will grow by about 0.7% in 2024, before slowing to between 0.3% and 0.4% in the following two years. Inflation, by contrast, is likely to be no more than 0.1%.

Dallas Fed economists said the Norwegian data and Spanish model generally support their findings. In terms of the mechanism of employment growth, they pointed out that while the labor force has increased, capital can only slowly meet this growth, which depresses inflation-adjusted wages. They said that households may temporarily reduce consumption and choose to increase working hours, but overall, the increase in demand for goods will exceed supply, thus putting upward pressure on inflation.

Article forwarded from: Jinshi Data