06/26/2019
The May employment report confirmed what many analysts had suspected: job growth is decelerating. Employers added 75,000 jobs last month, well below the 175,000 Wall Street consensus, which was itself far below the 263,000 jobs created in April.
Employment growth per the Household Employment Survey was also fairly muted: a total gain of 113,000. But the Household Survey reports job figures by nativity — unusually — and our analysis reveals a bifurcated result, with native-born Americans gaining while immigrants were losing jobs:
In May:
Why the drop in displacement? It might be the tariffs that Donald Trump loves and mainstream economists hate.
But while American Worker Displacement fell in May, the May NVDAWDI was still seventh-highest among the 125 months we’ve tracked since January 2009. The all-time displacement high, 123.0, was set in April of last year.
(It is curious that the past two Mays appear to be such outliers, with large declines in American Worker Displacement. There are no seasonal adjustments made to the immigrant and native-born employment figures published in the monthly employment report).
A better sense job trends are the year-over-year comparisons for the month of May presented in the table below. The table shows immigrants gained jobs at 5 times the rate of native-born Americans over the past 12 months.
The long term trend is all too clear: Native-born American workers lost ground to their foreign-born competitors throughout the Obama years; this accelerated significantly in the months leading up to the 2016 election. And more than half way through his first term, President Trump shows no sign of breaking the trend.
From January 2017 through May 2019, Trump has presided over a labor market in which immigrants gained 1.6 million jobs, a 6.1% increase, while native-born Americans gained 3.1 million, a rise of 2.5%. As far as job growth is concerned, “America First” has not translated into Americans First.
Another way of looking at American worker displacement: the immigrant share of total U.S. employment.
Immigrants held 17.59% of jobs in May 2019, a significant fall from their 18.06% share in April, but well above the 17.36% share of jobs they held last May.
These numbers are not seasonally adjusted, so year-over-year comparisons are likely more representative of the long-term trend. The record immigrant job share (18.08%) was recorded in April 2018.
And, of course, immigrant workforce is headed up again. The “Trump Effect” visible after his election, when the immigrant workforce population actually fell, has been completely erased. (Note that we think the hiccup in immigrant workforce growth visible in January may be a year-end artefact.)
The best news in the May report: wage growth. For years wage increases have been tepid even as the economy added jobs and unemployment continued falling. But now employees finally appear to be getting raises. For the second straight month average hourly earnings rose by 0.2% in May. In March wage gains of 0.1% were reported.
Over the past 12 months nominal private sector hourly earnings have risen by a healthy 3.2%.
(Note, however, that these recent gains look distinctly less impressive in a longer-term perspective).
The unemployment rate has been falling for years. Why did it take so long for wages to rise?
Economists increasingly believe the official unemployment rate is too narrow to capture the true slack in the labor market. It counts only people actively looking for work, which means it leaves out students, stay-at-home parents, people with partial disabilities, and others who might take jobs if wages were to rise above a certain threshold level.
If employers have been tapping into that broader pool of potential labor, it could help explain why they haven’t been forced to raise wages faster. But it is finally happening now.
Put differently, the Obama recovery was not strong enough to coax stay at homes off the couch and into the workforce. Trump has apparently changed that somewhat.
But, as brought out in the Economic Policy Institute graphic below, these annual hikes in nominal wage growth, although returning to pre-Great Recession levels, are still below the Federal Reserve’s target for non-inflationary wage growth:
So the Leftist EPI and the studiously impartial National Data agree: wage growth is now recovering — but not as good as it should be.
What EPI won’t tell you: Immigration may be the reason. Even larger wage gains would have transpired had the immigrant share of employment not increased. Economist George Borjas estimates that every 10 percentage-point increase in the foreign-born share of employment reduces native-born Americans’ wages by 3% to 4%. [Immigration and the American Worker, by George Borjas, CIS.org, April 9, 2013, and Yes, Immigration Hurts American Workers, Politico, October 2016].
Since January 2009 the foreign-born share of employment has risen by 2.4 percentage points — implying that wages would be growing about 1 percentage point above the 3.2% to 3.4% rate of recent months had an immigration moratorium been in effect since then.
In other words, the past 10 years of immigration have deprived American workers of a 33% wage hike.
A detailed picture of American worker displacement over the past year is available in the Employment Status of the Civilian Population by Nativity table published in the monthly BLS Report:
|
Employment Status by Nativity, May 2018-May 2019 |
||||
|
(numbers in 1000s; not seasonally adjusted) |
||||
|
May-18 |
May-19 |
Change |
% Change |
|
|
Foreign born, 16 years and older |
||||
|
Civilian population |
42,732 |
43,408 |
676 |
1.58% |
|
Civilian labor force |
27,923 |
28,473 |
550 |
1.97% |
|
Participation rate (%) |
65.3 |
65.6 |
0.3 |
0.46% |
|
Employed |
27,086 |
27,678 |
592 |
2.19% |
|
Employment/population % |
63.4 |
63.8 |
0.4 |
0.63% |
|
Unemployed |
837 |
795 |
-42.0 |
-5.02% |
|
Unemployment rate (%) |
3.0 |
2.8 |
-0.2 |
-6.67% |
|
Not in labor force |
14,809 |
14,935 |
126.0 |
0.85% |
|
Native born, 16 years and older |
||||
|
Civilian population |
214,722 |
215,453 |
731 |
0.34% |
|
Civilian labor force |
133,842 |
134,182 |
340 |
0.25% |
|
Participation rate (%) |
62.3 |
62.3 |
0.0 |
0.00% |
|
Employed |
128,924 |
129,474 |
550 |
0.43% |
|
Employment/population % |
60.0 |
60.1 |
0.1 |
0.17% |
|
Unemployed |
4,919 |
4,707 |
-212 |
-4.31% |
|
Unemployment rate (%) |
3.7 |
3.5 |
-0.2 |
-5.41% |
|
Not in labor force |
80,880 |
81,271 |
391 |
0.48% |
|
Source: BLS, The Employment Situation May 2019, Table A-7, June 7, 2019. |
||||
Over the past 12 months (May 2018 to May 2019):
Overarching everything: rapid growth in the foreign-born working-age population. It rose by 550,000, or 1.97%, from the prior May, while the comparable native-born population grew by 731,000, a gain of 0.34%.
Meanwhile, the crisis at the southern border has degenerated to the point where something may actually be done about it…in Mexico if not the U.S.
More than 144,200 migrants were arrested and taken into custody along the southwestern border in May, a 32% increase from April and the highest monthly total in seven years. Most crossed the border illegally, while about 10% arrived without proper documentation at designated border crossings.
During the first five months of 2019 491,664 illegals have been apprehended along the SW border. That is equivalent to the entire population of Kansas City, Missouri.
Mexico is listening: the government says it will deploy 6,000 troops along its southern border with Guatemala.
But the U.S. Congress? Not a peep.
It’s clear that, because of a combination of judicial sabotage, Congressional inaction, and insufficient executive action, 2017’s promising “Trump Effect” has completely evaporated and the southern border has now collapsed. [Trump Vowed to Slow Border Crossings. Now They've Hit a 12-Year High, by Brian Bennet, Time, April 10, 2019].
To repeat National Data’s traditional conclusion: Over the long haul, only legislation can protect American workers from displacement and wage depression. Trump lost his best chance to legislate patriotic immigration reform when the GOP lost the House. But he can still use the GOP Senate majority to “begin the conversation.”
Far from increasing immigration, he should demand an immigration moratorium.
A further thought: has everyone forgotten that the current immigration-driven demographic drift is suicidal for the GOP?
The Democrats haven’t — that’s why they won’t draw attention to immigration role in Trump’s American worker displacement failure.
Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants
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