Rock meets hard place, as 'foreign-born' inflows reverse
Is the slow-growth of the labor force, showing up in the slow-growth of the consumer force?
the rock n’ hard place of border patrol, revisited
inward remittances tell the tale
reinforcements in retreat
impact to consumer spending is (maybe) showing up in the data
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This was going to be a longer post about some stagflationary-ish observations—or the middling outcome, as Random Walk likes to say—but instead just a few charts on the catalyst that actually matters.
I will spare you the longer wind-up, but of changes wrought by the new regime, tariffs are a relative blip on the radar.
Closing the border, on the other hand, now that is a very big deal.
The rock n’ hard place of border control
There are too many backlinks to choose from, but perhaps The Immigration Debate that Wasn’t, But Should Have Been deserves some fresh eyes.
The tl;dr is that the country is caught between a rock and a hard place:
on the one hand, growth-by-acquihire-only, i.e. the surge in immigration-driven growth that has pushed the “foreign born” share of the polity and workforce to unprecedented levels, is unsustainable as a matter of shared culture, and social cohesion;1
on the other hand, without immigrants, the nation simply isn’t growing, given the decades-long failure to babymake (and without people-growth, any growth is historically hard to come by).
It’s a real pickle, decades in the making, made worse by years of neglect.
The surge in new arrivals that is fraying the social fabric to a breaking point also happens to explain all the workforce gains, much of the consumer spending gains, and most of the deflation post-ZIRP.
Can’t live with ‘em, and now we’re about to find out what it’s like to live without ‘em.
Foreign remittances DOWN
Anyways, I promised brief, and I will be brief. Behold some charts to consider the magnitude of the change.
Cross-border remittances (by count) to Mexico have declined by 2.1 million, yoy:
That 2.1 million decline is the largest in the series.
Could some part of that decline be attributable to the new remittance tax? Yes, yes it could, but at least some of it is simply the decline in net-new migrants.
Again, to return to the “weak” jobs data, not only has there been a decline in foreign born workers, it’s the largest ever decline (outside of 2020):
-1,653 bodies dropped out of the workforce, in the latest count.
Is the data a bit noisy? We know that it is. Are response rates likely effected by fear of deportation? Also probably yes.
But, still . . . I think we have a pretty decent sense that even if it’s not shrinking, the foreign born workforce isn’t growing.
If the labor force isn’t growing, the shopping force isn’t either
And if the foreign-born labor force isn’t growing, then the labor force isn’t growing, at least not by much.
And if the labor force isn’t growing by much, then the shopping force isn’t growing by much either:
Real consumption is flat, and while it’s not quite negative yoy, it’s heading that way.
Again, is some part of this a one-time step-up in prices due to tariffs? Maybe. Income growth is slowing, as well.
But mostly, I think, that real consumption is going flat because the number of consumers is going flat. Or at least, consumers with a paycheck. More to come.
Other interesting reads
Long-term impact of tariffs is “minor.” Working paper on the long-term impact of both transitory and permanent tariffs find them to be “a minor driver of US business cycle fluctuations” with inflation and the trade-imbalance “both largely unchanged.”
Previously, on Random Walk
Private Credit and Insurance, two peas in a pod (reprise), and a chart dump on default rates
five charts on the rise of private credit in life insurance
Energy in 1776
It’s July 4th, so Happy Birthday America, and we’re going to keep it light and only semi-topical.
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As a reminder, this isn’t “pro-immigrant” or “anti-immigrant.” It’s about outer limits to immigration, which pretty much everyone agrees we ought to have. The fact is that the last time we had anywhere close to this level of turnover it was accompanied/followed by decades of sectarian violence and civic upheaval, and capped-off by a ~40 year total ban on immigration. And back then, the “native born” population was young and fertile, and not old and childless. If your immigration policy is designed to make you look like the UN, just remind yourself how corrupt, dysfunctional and wicked the UN actually is.