SAN FRANCISCO: A slowing in the US labour market that started last year is set to continue amid an ongoing wave of undocumented immigration, according to a Federal Reserve Bank of San Francisco (San Francisco Fed) study.

“My estimates suggest that around one-fifth of the easing of labour market tightness in 2023 can be attributed to the spike in immigration,” San Francisco Fed economist Evgeniya Duzhak said in a paper published Monday on the reserve bank’s website.

That should continue “given the delays in migrants transitioning to the labour force and updated estimates pointing to a continuing strong inflow of migrants,” she said.

The San Francisco Fed study updated Congressional Budget Office (CBO) demographic projections published earlier this year that revealed the migration wave was much bigger than previously thought, leading many forecasters to upgrade their economic outlooks.

Duzhak’s estimates suggest an additional 1.3 million undocumented migrants entered the United States between October 2023 and January 2024.

That would bring the fiscal-year 2024 total to 3.8 million, versus the CBO’s most recent estimate of 3.3 million.

The United States expanded humanitarian parole for 640,000 people from Cuba, Haiti, Ukraine and Nicaragua and extended temporary protected status to about 472,000 Venezuelans in the last couple of years.

Although they are immediately eligible to receive work permits, Duzhak said she expects many of these people to continue entering the labour force throughout 2024 due to delays in processing.

The undocumented category includes those people using legal channels at official points of entry as well as people who are apprehended trying to cross the border and given a notice to appear before immigration court.

It also includes those who are harder to track, like undetected migrants and people who overstay their visas.

To study the impact of immigration on the labour market, Duzhak compared the ratio of job vacancies to unemployment at the state level with immigration-related court cases.

Florida, New York, Texas and California had the highest volume of new cases in state immigration courts in 2022 and 2023, according to the paper, while Louisiana, Massachusetts, Utah and Colorado also saw large per-capita volumes.

“Using state variation in court cases related to immigration, I find that this strong migration inflow eased labour market tightness,” she wrote.

 - Bloomberg