Is U.S. job growth being exaggerated? This controversy has ratcheted up in recent weeks, especially after the jobs report last Friday showed a huge 272,000 increase in payrolls--but the unemployment rose to 4%.
And we already know that when full revisions are done later this summer, last year's job growth will be revised down. That's because the full fourth-quarter employment census data that came out last week show the initially reported 250,000 per month job gains on average will be revised down to less than 200,000.
Fed Chair Powell mentioned this at his press conference after the Fed's rate decision Wednesday as well: "...payroll jobs [are] still coming in strong, even though there's an argument that they may be a bit overstated," he said in reply to a question.
One theory for why this is happening is that business bankruptcies are picking up post-pandemic, and not being correctly captured in the Labor Department's payroll survey. But Goldman Sachs warns that this line of reasoning may be mistaken.
According to Goldman, the quarterly survey we got last week is itself flawed, and not capturing the number of unauthorized immigrants who have entered the country and gotten work. That's because it's based upon a full count of state by state jobless claims which these workers typically can't file. Because the monthly payroll reports do generally include these workers, that data is actually more reliable than usual.
And in fact, if anything, the monthly numbers are understating the amount of true job growth we've had. Goldman estimates about a million unauthorized workers found jobs last year, or an average of 83,000 per month. "The real-time payroll numbers are currently capturing most but not all [of these] job gains...meaning that true job growth is actually higher, not lower," the firm wrote this week.
And the impact of the immigration surge doesn't just stop with the labor market, but extends to the whole U.S. economy. A recent Brookings study found that immigration has boosted GDP by 0.1 percentage-points in the past couple of years, while CBO projects a 0.2-point boost annually over the next decade, for a $7 trillion cumulative impact. Wages, on net, are said to be somewhat lower and rents somewhat higher as a result of this influx as well.
Money Report
As for other theories surrounding the jobs report, Goldman downplays the idea that a "bankruptcy wave" will leave revised job growth lower than it now seems. "Real-time data on business applications suggest that openings are still high, and data on bankruptcies suggests closures are still low," they note.
So, are immigrants able to find jobs because the economy is still strong--or is the economy strong in part because of the immigration surge? All we can say is that both have been true, at least up until now.
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Kelly
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