Political change is hard to predict but at the moment, anti-immigration sentiment is rising globally. Trump leaned into that theme this week at the UN when he said that countries are “going to hell” over immigration policy.
Today, Trump’s Department of Transportation immediately restricted who can obtain non-domiciled Commercial Driver’s Licenses. The government estimates that 200,000 current non-domiciled US commerical driving licence holders may lose licence eligibility and that only 6000 renewals are expected annually under the new rules.
Last week, we saw a severe restriction on H1-B visas.
This is part of a clear, broader strategy of deportation and limiting immigration. Ultimately, it will limit US population growth or lead to a decline but will maintain a tight jobs market. Between this and AI-related disruption, there will be a slow loss in US jobs but unemployment may not rise.
I don’t think that’s a path to GDP growth but it should ensure a standard of living for Americans. The tougher question to answer is whether it’s inflationary. Stephen Miran argues that the drop in population is deflationary for housing prices and that’s intuitive but it’s also inflationary for labor costs and greatly diminishes capacity.
I think it’s also hard to say whether other countries copy this strategy and if it will erode the long-term dynamism of the US economy. For now, the thing to realize is that it’s happening and that it will continue at least for the remainder of Trump’s term.
Today, Richmond Fed President Thomas Barkin said that the monthly breakeven jobs rate in the US is now flat to +50,000. Citadel founder Ken Griffin said something similar yesterday. I’d argue it can be -100K in the years ahead with unemployment still staying low. That will be a very difficult set of circumstances for traders and policymakers to navigate. My guess is that they cut too much into it and plant the seeds of serious inflation.
