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Foreign-born workers are leading the rise in the U.S. workforce, Fitch Ratings said.
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But it warned that a labor demand cooldown could lead to oversupply in the market.
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Employment growth in the government sector is also stimulating the labor market.
U.S. labor momentum appears to have been stuck in high gear since March Employment report.
But a simpler explanation may lie in U.S. immigration trends, as a surge in foreign-born workers fuels labor expansion, Fitch estimates. reported on Thursday.
„The post-pandemic increase in the US labor force was led by foreign-born workers, who represented 19% of the US labor force in YE 2023, up from 17% in YE19,” the rating agency wrote. „The foreign-born labor force participation rate is 66%, higher than the native-born participation rate of 62%.”
The figures come as net immigration has averaged 0.9% of the US population over the past two years, beating estimates of 0.3%.
But Fitch warned that while higher immigration flows would keep labor momentum going this year, it would also put oversupply at risk.
Like that Weakness Labor is starting to show in demand. That includes rising layoff announcements, a lack of full-time job openings and a decline in business hiring, according to Wall Street analysts.
However, Fitch said the contribution of immigrants to the labor force has significantly boosted economic growth, a finding shared by previous research.
For example, Goldman Sachs raised it 2024 GDP outlook due to this labor surge; when JP Morgan And Morgan Stanley highlighted Positive Effects of Immigration on American Publishing.
A Separate report Published Thursday, Fitch also named a secondary source of fuel for an impressive labor market: government hiring.
Job growth in the sector is expected to average 2.7% on an annual basis through 2023, the highest annual rate since 1990, the rating agency said. As government employment still lags behind the private sector, this is unlikely to decrease for now.
„The post-pandemic recovery for government payrolls did not begin until 2021, as most public educational institutions maintained a remote-only system with reduced staff throughout 2020,” Olu Sonola, president of American Economic Research, said in the report.
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