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The recent influx of immigrants to the United States is helping to boost the economy despite a number of global challenges, said Joyce Chang, chair of global research JP Morgan.
The Federal Reserve on Wednesday raised its 2024 U.S. GDP growth forecast to 2.1%, up from 1.4% in its December forecasts, as the economy continues to show resilience despite high interest rates as the central bank seeks to control inflation levels to manage.
Meanwhile, the labor market remained relatively hot despite tighter monetary conditions, with unemployment remaining below 4% in February and the economy adding 275,000 jobs.
The Fed also increased its forecasts for its preferred measure of inflation: core personal consumption spending. It now expects core PCE to rise to 2.6% from 2.4% after January and February inflation numbers dampened hopes that price increases were fully under control.
The core consumer price index, which excludes volatile food and energy prices, rose 0.4% in February from the previous month and was 3.8% year-on-year, slightly higher than forecast.
“We’re still seeing the phenomenon globally where service sector inflation is still well above pre-pandemic levels, so we’re looking at 3% for core CPI, but I think one thing that’s really underestimated in the US was the…” “Immigration story,” Chang told CNBC’s “Squawk Box Europe” on Thursday.
“The U.S. population is up nearly 6 million from about two years ago, and that accounts for a large portion of the increase in consumption, even taking into account very low unemployment rates.”
She noted that upward pressure on wages and housing costs, as well as the rise in energy prices so far this year, suggest the Fed is “not out of the woods” on inflation.
A recent report from the Congressional Budget Office estimates that net immigration to the United States was 3.3 million in 2023 and is expected to remain at that level in 2024 before falling to 2.6 million in 2025 and 1 in 2026 .8 million drops.
Immigration, and border crossings in particular, are among the hottest topics leading up to November’s presidential election. Chang noted that other events could exacerbate the problem, particularly the evolving situation in Haiti.
However, she argued that immigration is “a good thing” in terms of its net impact on the economy.
“From what we have seen, the revenue generated exceeds the expenditure. Now it’s a political issue, not just here in the US, but if you look at Europe, it’s probably the main issue right now, but we think.” “If you look at the unemployment numbers, the strength of consumption and immigration , that was a big part of it,” Chang said.
Other factors that have allowed the U.S. economy to outperform its peers include its high budget deficit and energy independence, Chang added. Europe has struggled in recent years to end its dependence on Russia for energy supplies.
Meanwhile, the Congressional Budget Office forecasts that the U.S. federal budget deficit totaled $1.4 trillion, or 5.3% of GDP, in 2023 and will rise to 6.1% of GDP in 2024 and 2025 .
“I think even in an election year there will be a lot of spending before September 30, so there’s not really much evidence that those numbers hold true.” [will subside]. I think that’s one of the reasons why I think the altitude will last longer,” Chang added.
Against this backdrop, JPMorgan sees only a “flat” easing cycle from the Federal Reserve, with inflationary pressures set to continue amid high government spending and immigration.
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2024-03-22 10:29:05
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