The labor market has continued to thrive, with some economists attributing the robustness of the job market to rising immigration levels. RSM Chief Economist Joe Brusuelas joins Market Domination Overtime to discuss why he believes "immigration's the explanation."

Brusuelas notes that the "social and political polarization" surrounding immigration has previously deterred economists from discussing its influence on the job market. However, he describes the influx of both legal and undocumented workers, which has led to the sustainable growth in the labor market being reflected in today's data as "undeniable."

With the US presidential election edging closer with every day, Brusuelas states there could be a slight downturn. Nonetheless, he notes that with sectors such as hospitality, manufacturing, and other industries in need of workers, labor markets could see immigrant workers "bleed into those areas" as well. Brusuelas emphasizes the need for "a more adult, rational conversation" about immigration policy and "the vital contribution" immigrants play in the labor force.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

Editor's note: This article was written by Angel Smith

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: The labor force continued to show strength without overheating the economy. That has been confounding many economists until really more recently. The answer may lie in immigration. For more, we've got RSM Chief Economist Joe Brusuelas. Joe, it's great to have you here.

- Good to see you, guys.

JULIE HYMAN: So this is something we touched upon the last time you were here. But I don't think it's gotten enough attention, because there is this question of, how can we keep seeing the kinds of jobs gains that we are seeing month over month with the household survey showing different numbers and inflation not accelerating?

JOE BRUSUELAS: Immigration is the explanation. Essentially, if you look at the household survey it's just not picking up, the contribution of both legal and undocumented workers to the overall labor supply, right? Where I live in Texas, it was really impossible to get anything done in construction. You couldn't get a seat at a restaurant, right? The restaurants would be open, but they didn't have enough workers, right, to serve the tables.

All of a sudden, it turned on a dime in about six months, and it's pretty clear what it was, right. It's the role of immigration, which traditionally we economists understand this. It's just that the social and political polarization around this kept us from really talking about it. But now it's undeniable.

So in that household survey, they're severely underestimating. On the establishment side when we look at average hourly earnings, right, it's probably overestimating the rise in wages. It's actually probably a lot less. That's why one we're seeing the increase in overall activity, better growth, and we think boosting productivity.

JOSH LIPTON: So kind of the low level of employment and low inflation, Joe, you're seeing in part because of immigration, do you see that continuing that trend?

JOE BRUSUELAS: Well, we do. Now, obviously, we're going to have an election here.

JOSH LIPTON: How would that impact it?

JOE BRUSUELAS: Well, that could effectively shut some of it off, right, especially on the legal side. I don't necessarily think it's going to do much for some of the undocumented. But the truth is when you think about where the need was, we never did get back to the level of employment in leisure and hospitality, right?

You think about the jobs in construction, right, there's not enough people to fill those jobs. My sense is you're probably going to see it bleed in some of the manufacturing sector because we're hearing about how-- you know, the National Association of Manufacturing put out a very persuasive piece this week. They're going to be short workers going forward in a significant way, right?

So we're going to at one point need to have a more adult rational conversation around immigration policy and the vital contribution it plays to the filling the needs in our labor force and providing an avenue for much stronger growth and better productivity.

JULIE HYMAN: If we see a Trump presidency and he does clamp down further on immigration, is there a case to be made that could be inflationary?

JOE BRUSUELAS: Yes, in general. But we want to be careful, because we just won't know what that looks like until that policy is put in place, just how stringent it is, and if they really close the borders, that sort of thing. We just don't know.