Goldman Sachs recently conducted an analysis shedding light on a significant yet often overlooked aspect of the U.S. economy: the impact of illegal immigration on the country’s official unemployment rate. Led by chief economist Jan Hatzius, the team of Goldman strategists uncovered a notable discrepancy in the reported unemployment figures, attributing it to the recent surge in illegal immigration.
Their findings revealed that the influx of immigrants has substantially increased the American labor force by an estimated 1.1 million individuals. Moreover, household employment saw a significant uptick, with approximately 1 million new jobs being filled by immigrants. This surge in immigration, while not fully accounted for in official statistics, has tangible implications for the nation’s economic landscape.
According to Goldman’s projections, if these immigration-driven changes were properly factored into the equation, the unemployment rate for March would have been 3.9%, up from the previously reported 3.8%. This seemingly minor adjustment underscores the significance of accurately assessing the true composition of the labor force.
The discrepancy in the data arises from the methodology employed in tracking immigration trends. The U.S. Labor Department relies on two primary surveys: the establishment survey and the household survey. While the former collects data from businesses and government agencies to gauge monthly job additions, the latter conducts interviews with individuals to determine the unemployment rate. However, the household survey’s population estimate, based on data from the Census Bureau’s 2022 American Community Survey, fails to capture the recent surge in immigration.
The disparity between official estimates and reality becomes even more apparent when considering the differing growth projections from the Census Bureau and the Congressional Budget Office. While the former estimated a modest 0.5% population growth in 2023, the latter projected a substantially higher increase of 0.9%, largely driven by a surge in illegal immigration at the southwest border.
Goldman Sachs estimates that approximately 64% of immigrants in 2023 were unauthorized, while around one-third applied for asylum, granting them the ability to seek work authorization after 150 days. Despite their significant contribution to the labor force, these immigrants often go unaccounted for in official statistics.
As a result, the household survey, which relies on the Census population estimate as a benchmark, likely understates both the size of the labor force and employment levels. This discrepancy between the establishment and household surveys widens the gap in reported unemployment figures, painting an incomplete picture of the nation’s economic landscape.
Goldman Sachs suggests that the issue may be resolved in January 2025, when the Labor Department plans to incorporate information from the updated 2023 American Community Survey. Until then, accurately assessing the true extent of the labor force and employment levels remains a challenge, highlighting the complexities of immigration’s impact on the economy.