Federal Reserve Chair Jerome Powell: Migration Is ‘Neutral’ for Inflation

The U.S. government’s immigration policy raises inflation pressures in some parts of the economy, but also reduces it in other parts of the economy, Federal Reserve chair Jerome Powell told Sen. JD. Vance (R-OH).

“Overall, in terms of aggregate inflation, I wouldn’t say it’s a driver [of inflation] one way or the other,” Powell told Vance on July 9.

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Powell’s admission discredits media-magnified claims by many business interests — including Goldman Sachs — that more migration would help reduce the inflation that has crippled President Joe Biden’s administration. That unfounded claim has been touted by many establishment media outlets, such as the New York Times.

Powell, however, did not discuss how migration also reduces the workplace investment that raises American employees’ productivity and wealth.

Migration does curb wages and wage inflation but it raises housing prices and housing inflation. according to Powell:

Many people came into the country over the last couple of years, many of them through asylum requests — and went to work. Labor supply increased a great deal.

There’s no clear answer but my sense is that in the long run, immigration is kind of neutral on inflation.

In the short run, it may actually have helped because the labor market got looser because there were more people.

But you’re talking about housing specifically. I’m sure there are places in the country where new people coming into the country … will have contributed to an already tight housing market.

Powell’s admission follows prior comments from other members of the 12-member Board of Governors at the Federal Reserve.

“While the long-run effect of increased immigration on inflation is unclear, immigrants nonetheless need a place to live, and their arrival in the U.S. has likely also increased demand for housing,” said Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said on May 7.

In turn, he said, mortgage rates are nudged upwards with higher interest rates, saying, “Perhaps a neutral [interest] rate for the housing market is higher than before the pandemic.”

“Given the current low inventory of affordable housing, the inflow of new immigrants to some geographic areas could result in upward pressure on rents, as additional housing supply may take time to materialize,” Michelle W. Bowman, another board member, said June 25. But the inflow of migrant workers also reduced the growth of wages and wage inflation, she said.

But even as immigration helps the overall economy and investors, it hammers ordinary Americans who have to pay their higher housing costs with lower wages. For example, Statista reported that Americans’ per-person, after-inflation disposable income dropped from $48,490 in 2021 down to $45,343 in 2022.

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Since the 1970s, wage-earning Americans have seen a zigzag drop in their share of the new wealth produced each year while more wealth has been transferred to investors via the vastly inflated stock market.

The movement of new income from wages into the stock market skews wealth towards older, wealthier people who own stocks. The wealthiest 10 percent of Americans owned 93 percent of stocks while the bottom half of Americans owned just 1 percent of all stocks. The remaining 6 percent of stocks are held by the upper-middle cohort of Americans, according to Yahoo.com. 

Many advocates for more migration say the inflow benefits the economy by providing workers whenever employers face pressure to raise wages for Americans. “Pull factors, represented by the tightness of the US labor market, are a significant determinant of the number of border crossings on the US Southwest border,” said a May 2024 report by Dany Bahar, a pro-migration activist from Venezuela.

But immigration also reduces the productivity growth which gradually pushes up Americans’ salaries and cuts inflation.

“We conclude that while a tight labor market [a labor shortage] leads to inflationary pressures in the short term, [the resulting] stronger productivity growth can expand production capacity, thereby softening price pressures in the long run,” said a June 2024 report by the Federal Reserve Bank of St. Louis. The report noted:

Discussions of labor issues and automation often coincide in [Wall Street] earnings calls. For example, in a first quarter 2024 earnings call, an executive at an automotive technology company said: “Our focus this year is on accelerating automation to address wage inflation and improve efficiencies in our plants.” This excerpt clearly demonstrates the phenomenon of firms turning to automation as a way to reduce labor costs.

…

Firms within industries that heavily employ routine manual tasks—about one-sixth of our sample—and that mention labor issues in earnings calls see an increase in labor productivity. More specifically, we found that a 1-unit increase in labor issues is associated with an 8.9 basis point increase in productivity growth after four quarters. Notably, the effect of a tight labor market on productivity is negative for firms relying on nonroutine tasks. Since these firms cannot easily substitute labor with capital, their productivity growth is more hampered by the labor issues they face.

The damage done by migration to productivity is getting more top-level recognition.

“We always used to think [a] shrinking population is a cause for negative [economic] growth,” BlackRock founder Larry Fink said at a pro-globalist event in April hosted by the World Economic Forum in Saudi Arabia. He continued:

But in my conversations with the leadership of these large, developed countries [such as China, and Japan] that have xenophobic anti-immigration policies, they don’t allow anybody to come in — [so they have] shrinking demographics — these countries will rapidly develop robotics and AI and technology … If a promise of all that transforms productivity, which most of us think it will [emphasis added] — we’ll be able to elevate the standard living in countries, the standard of living for individuals, even with shrinking populations.

Canadians are going through the same migration wringer as Americans.

For example, Prime Minister Justin Trudeau’s max-immigration economic policy is reducing productivity by diverting investment funds away from automation and into the high-rent housing needed by the larger population.

“A growing share of savings and investment has flowed to real estate and construction, which, while needed and beneficial for many reasons, are both relatively inefficient and can hold back the overall productive growth of an economy,” admitted a June 4 report by Canada’s RBC Royal Bank. “Our economy is now smaller than it was in 2019 when adjusted for inflation and immigration, and pretty much in the same place it was a decade ago,” the report said.

Extraction Migration

Since at least 1990, the federal government has quietly adopted a policy of Extraction Migration to grow the consumer economy after it helped investors move the high-wage manufacturing sector to lower-wage countries.

The migration policy extracts vast amounts of human resources from needy countries. The additional workers, white-collar graduates, consumers, and renters push up stock values by shrinking Americans’ wages, subsidizing low-productivity companies, boosting rents, and spiking real estate prices.

The rarely mentioned economic policy has pushed many native-born Americans out of careers in a wide variety of business sectors, reduced Americans’ productivity and political clout, slowed high-tech innovation, shrunk trade, crippled civic solidarity, and incentivized government officials and progressives to ignore the rising death rate of discarded, low-status Americans.

Donald Trump’s campaign team recognizes the economic impact of migration. Biden’s unpopular policy is  “flooding America’s labor pool with millions of low-wage illegal migrants who are directly attacking the wages and opportunities of hard-working Americans,” said a May statement from Trump’s campaign.

The secretive economic policy also sucks jobs and wealth from heartland states by subsidizing coastal investors and government agencies with a flood of low-wage workers, high-occupancy renters, and government-aided consumers. Similar policies have damaged citizens and economies in Canada and the United Kingdom.

The colonialism-like policy has also damaged small nations and has killed hundreds of Americans and thousands of migrants, including many on the taxpayer-funded jungle trail through the Darien Gap in Panama.