Here’s What Might Be Driving America’s Strong Job Market

Estimated reading time: 3 minutes

The U.S. economy is doing pretty well at the moment, especially compared to its peers. President Joe Biden called it “the envy of the world” during his recent State of the Union speech. Job growth has been strong and steady – to the surprise of some economists. But new research is shining light on what the cause might be.

Economists at the Brookings Institution’s Hamilton Project point to a recent surge in immigration as a key driver of job growth.

The consumer price index rose 0.4% on a seasonally adjusted basis between January and February, the biggest monthly increase since September. It was largely driven by higher costs of shelter and gasoline, which together contributed more than 60% of the increase. Year-over-year, the price index rose 3.2%, slightly more than the 3.1% recorded in January.

Exceeding Expectations

In 2023, the U.S. economy added on average more than 250,000 jobs per month. That was well above expectations, especially in the face of high interest rates that drove up costs for companies.

Looking at it through a different lens, the U.S. job market was able to absorb far more new workers than economists predicted to be available. And immigration might just explain the disconnect.

The Congressional Budget Office (CBO) estimates that the number of net immigration into the U.S. was 3.3 million last year, far exceeding prior estimates from other groups, including the Census Bureau. In comparison, net immigration averaged just 900,000 people per year during the 2010-2019 period, according to CBO. For 2024, the agency again projects net immigration of 3.3 million again, before it steps down to 2.6 million in 2025.

Economic Impact

Economists have long agreed that immigration has a net positive economic impact as both output and productivity increases. And according to the Brookings economists, consumer spending and subsequent GDP growth was likely helped by the jump in immigration, too.

If this trend continues as the CBO expects, the U.S. economy could see this boost reflected in future data as well.

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