Is Immigration Not Tariffs Becoming Powell’s New Excuse

Jerome Powell has made it clear that tariffs could induce higher inflation.

Accordingly, the Fed has resisted cutting interest rates.

Despite his concerns, fears of tariff-based inflation, as judged by individual and business surveys, are fading. Moreover, even some Fed members are backing away from their prior outlook that inflation would be transitory due to the effects of tariffs.

As tariff fears subside, is immigration the new inflation concern for the Fed?

To help us better appreciate how President Trump is impacting immigration and the labor market, we share the insight of Greg Valliere, a long-time Washington, DC insider.

The following are quotes from his daily newsletter:

BE CAREFUL WHAT YOU WISH FOR: 

The White House has been demanding the deportation of immigrants, ASAP – but that may backfire as hundreds of thousands of workers flee, leaving crops rotting in the fields and hotels without enough employees.

THE LABOR MARKET HAS BEEN TIGHT for the past few years, but not like this.

The epicenter is in California, where workers are scarce as they leave the state in droves. 

THE IMMIGRATION SHORTAGE HAS AFFECTED FIRMS like Disney and Walmart as their workers’ temporary legal status has been revoked.

This has prompted firms to hike their salaries and benefits, and has led to the inevitable fear of inflation.

THERE’S LITTLE DOUBT ON ONE POINT: 

illegal border crossings have plummeted to the lowest levels in decades – accompanied by the realization that the economy needs more waiters, farm labor, construction workers, etc.

THIS IS A MAJOR REASON WHY FED CHAIRMAN JEROME POWELL is tentative.

The economy is softening in much of the country as crops lie fallow

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