Fed Officials Sharpen Concerns Over Trump’s Immigration PolicyBy and
Shortages no longer limited to skilled labor, companies report
Kaplan says ‘sensible immigration reform’ can help boost GDP
Federal Reserve officials are beginning to worry out loud that President Donald Trump’s immigration policies are depriving U.S. companies of a scarce resource: workers.
Patrick Harker, president of the Philadelphia Fed, became the latest policy maker to call attention to the struggles of companies in finding low-skilled labor.
“I’m hearing this more and more and more,” Harker said Friday during remarks to the Pennsylvania Economic Association. “We’re feeling real tightness and part of this is related to immigration policy.”
Employers in many U.S. regions have for months been reporting difficulty in filling skilled positions. Now, with the Trump administration clamping down on illegal immigration just as unemployment hits its lowest level since 2001, more companies are also scrambling to find basic laborers.
Trump has touted his record on cracking down on illegal immigration, pointing to a 38 percent increase in arrests of suspected undocumented immigrants in the first 100 days of his administration from the same period last year. And while the president has said he favors legal immigration, the emphasis thus far has been on reducing immigration rather than boosting it.
The Fed’s most recent Beige Book, a compilation of anecdotal information collected by the 12 regional Fed banks through May 22, included examples of how that might be playing out in the labor market.
“Recent changes in immigration policy created substantial labor supply shortages for low-skilled workers in the agriculture sector,” the San Francisco Fed reported. “As a consequence, some growers discarded portions of their harvest.”
The Chicago Fed said one manufacturing firm raised wages 10 percent to attract better applicants and improve retention of unskilled workers. A freight trucking firm in Cleveland reported granting raises of almost 8 percent in an attempt to retain workers.
With labor force participation already lingering near its lowest levels since the 1970s, economists see a big challenge in bringing more workers off the sidelines eight years into this economic expansion. The participation rate declined in May to 62.7 percent, the lowest this year and close to the 62.4 percent post-recession trough that was the weakest since 1977, Labor Department data released Friday showed.
Underemployment at its lowest in a decade underscores that slack is now being more rapidly absorbed, and it’ll become more difficult for younger workers to offset retiring baby boomers that are expected to continue to leave the labor force in droves.
That has economists and some policy makers pointing to immigration policy as a key factor to slow the bleeding. There were about 8 million undocumented workers in the U.S. labor force in 2014, good for 5 percent of the civilian labor force, according to Pew Research Center analysis of Census Bureau data. Lawful immigrants numbered about 19.5 million.
Dallas Fed President Robert Kaplan has repeatedly called for immigration policies that will help replace workers as baby boomers retire.
“I know it’s controversial, but sensible immigration reform” can help address that problem, Kaplan said May 31 in New York. “Immigrants and their children have made up over half the workforce growth in this country over the last 20 years. So if we do things that limit sensible immigration, we are likely to slow GDP.”
Kaplan said Trump’s policies may also be helping to suppress consumer spending.
“There are millions of immigrants living in this country,” Kaplan said. “They are not going out and shopping. They are staying home.”
That, he added, has “has some muting effect on consumer spending and, therefore, GDP growth.”