US | Labor and Immigration Upheaval: Worker Shortages, Higher Wages?

Summary

Notwithstanding BBVA Research's assessment that widespread deportations are improbable and that significant deviations in migration trends —beyond those tied to economic cycles and labor demand— are unlikely, a chilling effect could nonetheless materialize.

Key points

• Key points:
• December’s stronger-than-anticipated payroll gains (256K) and a 4.1% unemployment rate underscore enduring labor market momentum.
• Job openings rose to 8.10 million, but the declining quits rate suggests wage growth may continue to moderate.
• The Federal Reserve is likely to maintain its policy stance while closely monitoring labor-force participation, wage trends, and immigration measures, given their potential to delay any prospective rate-cut cycle.
• Fear of deportation may discourage undocumented workers from engaging in the labor market, possibly exerting upward pressure on wages and inflation.
• Although investment-friendly policies could temper these effects over time, economic uncertainty and volatility remain elevated.

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