The U.S. job market is a hot topic right now, and according to a recent report by Goldman Sachs, the official unemployment rate might be lower than it actually is due to a surge in illegal immigration. The report, led by chief economist Jan Hatzius, suggests that the recent influx of illegal immigrants has boosted the American labor force by approximately 1.1 million and household employment by 1 million. This discrepancy in the data is primarily due to the way immigration is accounted for in official reports.
When it comes to measuring employment in the U.S., the Labor Department relies on two main surveys: the establishment survey and the household survey. The establishment survey collects data from around 122,000 businesses and government agencies to determine the monthly job additions in the country. On the other hand, the household survey uses a population estimate from the Census Bureau as a benchmark. However, this estimate failed to capture the recent surge in immigration because it was based on outdated data from the 2022 American Community Survey.
The Census Bureau estimated a 0.5% population growth in the U.S. in 2023, while the Congressional Budget Office projected a 0.9% increase, attributing the difference to the CBO’s attempt to account for illegal immigration from the southwest border. The discrepancy between the two reports has implications for the labor force and employment figures, with the household survey likely underestimating the true number of workers by anywhere from 100,000 to 400,000.
One of the reasons for this underestimation is that companies are not required to report immigration status when submitting employment data, leading to discrepancies between the establishment and household surveys. The unauthorized immigration surge in 2023 is believed to have widened the gap in employment figures between the two surveys. However, Goldman Sachs predicts that this issue will be resolved by January 2025, when the Labor Department incorporates data from the updated 2023 American Community Survey.
Overall, the report highlights the complexities of measuring employment accurately, especially in the face of significant demographic changes like increased illegal immigration. As policymakers and economists grapple with these challenges, it is essential to ensure that data collection methods are updated and reflective of the current state of the labor market. This issue serves as a reminder that behind the statistics and reports are real people whose livelihoods are impacted by how we measure and interpret employment data.
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