The Jobs Numbers Aren’t Adding Up. Immigration Helps Explain Why.

U.S. employment figures contain a mystery that has left many economists scratching their heads: How is the country generating so many jobs even while the unemployment rate has drifted up?

The emerging consensus: a surge in immigration. It not only explains inconsistencies in the jobs data but suggests the economy can keep adding plenty of jobs without overheating. That in turn would let the Federal Reserve still consider interest-rate cuts.

The Labor Department’s Bureau of Labor Statistics bases its monthly employment figures on two surveys. One survey of about 119,000 businesses and government agencies, called the establishment survey, is the main source for determining how many jobs the U.S. added each month. The other, a rotating survey of about 60,000 households, is used to calculate the unemployment rate and includes a separate employment estimate.

Data in the two surveys never precisely match, even after accounting for differences in the types of employment they cover—the establishment survey doesn’t include farmworkers, for example. But recently, the differences between the two have become extreme.

The establishment survey shows there were about 2.7 million more jobs in February than a year earlier. But household-survey figures adjusted to match the establishment survey’s employment concept show the economy added less than half as many jobs. The unemployment rate rose to 3.9% from 3.6% during that period.

To get its employment figure from the household survey, the Labor Department calculates the share of the population that is working and then applies it to population estimates from the Census Bureau. This might be the source of the discrepancy: That population estimate might be off.

The census estimates the U.S. population rose 0.5% in 2023 from a year earlier. But in January, the Congressional Budget Office estimated it rose by 0.9%. That difference was the result of the CBO’s effort to account for the millions of migrants who crossed the southwest border last year.

Based on the CBO estimates, a Brookings Institution analysis last month suggested the lower household-survey employment figures were driven by the census underestimating population growth. That implies the labor market could grow much faster without overheating.

Earlier, it looked as if the U.S. could add only about 100,000 jobs a month without driving the unemployment rate lower and increasing wage pressures.

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In his press conference following the Fed’s policy meeting last month, Fed Chair Jerome Powell acknowledged the implication of an increase in the supply of workers, driven in part by increased immigration. “In and of itself, strong job growth is not a reason for us to be concerned about inflation,” Powell said.

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