BCA on why Trump’s immigration policies may not mean a strong job market Via Investing.com

Investing.com — BCA Research challenged the view that Trump’s immigration policies will tighten the labor market and spur inflation in a note to clients this week.

The firm’s analyst said that while less labor supply is a likely outcome, this will also reduce labor demand.

The company says: “The contribution of immigrants to meeting their needs goes beyond their consumption of goods and services.

“It includes the use of money that happens in their name. For example, even though illegal immigrants are not eligible for most federal welfare programs, they have access to Medicaid emergency services. They can also collect benefits on behalf of children born in the US,” the BCA added.

They explained that building multi-family housing to meet refugee housing demand would generate $40,000–$80,000 in additional construction per immigrant.

They also believe that the speed of policy implementation will be important.

The BCA admits that an immediate dismissal campaign could strengthen the labor market, but they consider such an outcome unlikely.

“The infrastructure to fire millions of workers simply doesn’t exist,” and any slow slowdown in immigration growth could reduce labor demand more than supply.

BCA also says that the historical relationship between immigration and interest rates supports this view.

The US, with the highest levels of immigration among the G3 economies, has historically maintained high interest rates, while Japan, with the least amount of immigration, has seen the lowest rates.

They believe that reduced immigration would lead to lower average interest rates in the US

The BCA concludes that the economic implications of Trump’s immigration policies are more complex than a simple tightening of the labor market, with broader effects on demand and interest rates that shape outcomes.