By many standards, the U.S. economy is not only doing very well, but is by far the strongest in the  world, and getting even stronger. The last monthly jobs report cited 275,000 jobs added. Financial markets are flirting with all-time highs. Unemployment has remained below four percent for the longest period in decades. Even inflation that has been world-wide, and the most toxic item to consumers, is falling, and has fallen here more than in the other major economies.

Yes, some prices are higher than before the pandemic. But wage growth, for the first time in a long time, is rising faster than prices. Of the most volatile items of the CPI, gas prices have dramatically declined. Although grocery prices remain stubbornly higher than prior to the Pandemic, the proportion of disposable income Americans spend on food is lower than in other economies, including Canada, Australia, and Europe. This is due to a productive agriculture that includes the crucial role of immigrants and foreign-born labor in the production and processing of meat, dairy products, fruits and vegetables. More on this below.

The much cited CPI tracks a market basket of goods and services. Prices of some items rise while some remain stable or fall.  Consumers like falling prices. But if all prices fall, a condition known as deflation, economic activity is depressed and is usually accompanied by recession. That’s why the Fed, and most economists, recommend a target inflation rate of around two percent, large enough to encourage economic activity and modest enough to keep prices from rising too fast.

As the world has emerged from the Pandemic, and is emerging from the Pandemic-related inflation, the U.S. has thus far arrived at a “soft landing,” — reduced inflation without recession — that few pundits, and economists for that matter, had thought likely. The primary reason for this welcome but unpredicted scenario is that the Pandemic-related inflation was due mainly to economic disruptions related to supply issues rather than to monetary and excess demand issues.  

The Fed’s major inflation-fighting tool is to raise interest rates, which they have done. While this obviously had a role in reducing demand, hence price increases, the major factor in taking pressure off prices was loosening up supply chains, including getting people back to work. It is this process that actually did a major share of the Fed’s work for them — taking pressure off prices while increasing economic activity and evading recession.

Recall that during the Pandemic, many workers either voluntarily stayed, or were urged to stay, away from crowds, including their workplace. This was against a backdrop of aging Baby Boomers at or close to retirement. Some decided to make permanent their newfound absence from the work place. Many others, particularly women with low-wage jobs, although preferring to resume paid employment, found child-care unavailable or unaffordable. 

Nevertheless, labor force participation rates are rising, and the nation has avoided recession. When Nobel Laureate economist Paul Krugman was queried about this situation he replied succinctly, “It’s the immigration, stupid.”

He elaborated: “The economy is chugging along, creating lots of jobs, inflation is basically in the review mirror and not a hint of the terrible stuff that was supposed to be happening. A major reason that employers have been able to keep hiring without inflation is because the labor force is growing. How much of the increase since 2020 is foreign workers? The answer is all,” he said, adding that every aspect of U.S. output performance relative to other advanced countries is due to its ability to grow rapidly, thanks to the availability of foreign-born workers.

As of this month, there were 3.1 million more immigrant workers in the labor force than just before the Pandemic, while the native-born workers in the labor force rose to just 1.5 million above its Pandemic level last summer, but has since shrunk below those levels. 

When Krugman was asked whether foreign-born workers were “stealing American jobs,” he countered with the explanation that it was the opposite.

“They’re not stealing American jobs. Foreign-born workers tend to have different skills and work in different industries and so they’re not perfect substitutes for American workers. What they do is they open up space to run the economy hotter and almost certainly lead to higher employment among people here.” An example he cites is that immigrants are heavily represented in the care sector, as nannies, home health aides, and nursing-home assistants. By caring for middle- and upper-class Americans’ children and homes, immigrants allow middle-class women to do more in the paid workforce.

Americans continue to complain about high food prices even though they pay a lower percentage of disposable income for food than any other nation — six percent for food consumed at home and around eleven percent including food away from home. 

But what would food prices be without the thousands of immigrants and foreign-born workers who do the back-breaking work with low pay in production and processing of fruits, vegetables, meat, and even dairy products?

For a local example, it was the once-kids like this scribe and many readers of this column who were dairy farm workers decades ago. Now, over half the nation’s workers in milk and cheese production are foreign-born

As our population ages, health care and elder care workers will be needed in ever greater numbers. And native born Americans are unwilling, at any price, to do much of the back-breaking work of harvesting fruits and vegetables, and doing the unpleasant, and often dangerous, work in slaughter houses.

Of course not all immigrants are performing low-paid labor. Immigrants have made their mark in Silicon Valley and the high tech sector. Many positions in the medical field are occupied by highly trained foreign-born men and women. This illustrates the case for immigration policies adapted to needs for various skill levels of various industries.

We should also note that immigrants tend to start businesses at higher rates than native-born Americans.

It’s clear — immigrants and foreign-born workers are a tremendous asset to our economy, and we are fortunate to have access to them.  To put it bluntly, we need them to get important work done.

— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears monthly in the Monroe Times.