Goldman Sachs expects the U.S. economy to grow faster this year than initially expected as increased immigration boosts the U.S. workforce.
In a new research note on Sunday, Goldman cited increased immigration when raising its fourth-quarter year-over-year economic growth forecast to 2.4% from 2.1%. Goldman expects the U.S. economy to grow at an annual rate of 2.7% for the full year.
“One reason for the stronger GDP growth in 2023 is that immigration is significantly higher than the recent historical average and the labor force is increasing,” Goldman Sachs economist Lonnie Walker said in a research note on Sunday. “It has boosted its size and potential GDP.” “We have updated our payroll and GDP forecasts to factor in the continued boost from above-trend immigration.”
Immigration is expected to be 1.5 million above trend in 2023 and 1 million above trend in 2024, according to Goldman research. For Goldman's team, this helps explain the unexpected job creation seen in the labor market last year. The economy as a whole is showing faster-than-expected growth.
Increased immigration may also help explain the recent rise in the unemployment rate, which rose to 3.9% from 3.7% in February. Increased immigration means more workers entering the labor force, but this is not usually seen as a negative reason for increased unemployment.
This means the recent rise in unemployment is likely not a sign of a slowdown in the overall labor market, Goldman argues. The company expects the U.S. labor market to end this year with an unemployment rate of 3.8%.
“Last year's increase in the unemployment rate primarily reflected an increase in labor supply from new immigrants and is unlikely to trigger the vicious cycle of job losses, lost income, and further job losses that typically accompanies higher unemployment rates.” Walker said. I have written.
Goldman is not the only economics team to highlight recently the potential for increased immigration to contribute to economic growth. Greg Daco, chief economist at EY, noted the growth in the Yahoo Finance Chartbook in January.
“The resurgence of immigration in the United States plays a vital role in promoting population growth and labor force participation, contributing significantly to rebalancing the labor market,” Daco told Yahoo Finance in January. Ta. “This influx of new workers is helping to ease labor supply constraints, particularly in sectors that remain in short supply, thereby easing upward wage pressures and driving disinflationary pressures. .”
He added: “This demographic shift promises to inject much-needed dynamism and diversity into the workforce and provide a more balanced and sustainable path for the economy.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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