Federal Reserve Chairman Jerome Powell has attributed the recent surge in the nation’s unemployment rate to the ongoing migrant crisis, following a significant interest rate reduction for the first time since early days of COVID-19. The benchmark interest rate was cut by 0.5 percentage point on Wednesday.
Speaking to reporters about the current state of monthly job creation, Powell explained that “if you’re having millions of people come into the labor force, and you’re creating 100,000 jobs, you’re going to see unemployment go up.” He further elaborated on this statement by saying, “So it really depends on what’s the trend underlying the volatility of people coming into the country.
According to the Wall Street Journal, Powell emphasized that there has been a significant influx of people across the borders, which has played a role in increasing unemployment levels. He also mentioned the slower hiring rate as something that is being closely monitored by the Fed. It does depend on what’s happening on the supply side,” he added.
This development comes after the Fed accelerated its plan to cut interest rates – initially thought to be just 0.25 percentage point – amid growing concerns about rising unemployment and slowing economic growth in recent months. The unemployment rate has been on a steady upward trajectory over the last year, with a particular spike observed during spring. In August, it rose to 4.2%, up from its starting point of 3.7% at the beginning of the year, as per figures from the US Department of Labor.
The US has experienced a sluggish job market in recent months, with only 142,000 jobs added in August – a figure that fell short of the projected target by around 20,000 jobs. In July, there were even fewer additions to the workforce, with just 89,000 positions created – the lowest since the onset of the pandemic. The overall assessment of the labor market took a major hit in August when it was revealed that there were 818,000 fewer jobs created between March 2023 and 2024 than had previously been reported.
A significant factor influencing unemployment rates is the influx of migrants into the country since President Biden took office in 2021. More than 9 million people have been caught crossing the border, along with an estimated one million more who managed to sneak in undetected. These migrants have flooded various cities and towns across the US, often filling positions that would otherwise be occupied by blue-collar workers.
The Fed’s decision to cut interest rates indicates that the board of governors now believes that unemployment poses a greater risk to the economy than inflation. This move aims to stimulate economic growth and encourage businesses to hire more workers, ultimately addressing the growing issue of unemployment in the nation.
