Biden executive order on immigration, labor markets and supply chains

President Joe Biden’s new executive order tightening asylum limits at the U.S.-Mexico border could have a double-edged economic effect by tightening labor markets while easing labor bottlenecks. supply chain between the two countries, economists and trade analysts say.

The measure will temporarily prevent undocumented immigrants who enter the United States at the southern border from obtaining asylum, except in certain cases, and make it easier and quicker for Border Patrol agents to expel those people.

“The simple truth is that there is a global migrant crisis,” Biden said at the White House on Tuesday. “If the United States does not secure our border, there will be no limit to the number of people who could attempt to come here.”

Asylum restrictions are triggered when the average daily number of migrant encounters exceeds 2,500 in a week. They would be lifted two weeks after the government determined that the daily average of encounters with migrants had fallen below 1,500 for seven consecutive days.

Currently, the average number of migrant encounters is about 4,000 per day, Department of Homeland Security officials told NBC News.

As a result, a senior administration official told reporters that the temporary ban would go into effect “immediately.”

The temporary shutdown would not block trade or travel, however. And it would still allow immigrants who enter the United States legally to seek and receive asylum.

“For those who say the measures I’ve taken are too strict, I say to you, be patient,” Biden said in his remarks Tuesday, a nod to anger that the new health restrictions asylum have already aroused among progressives.

But economists and industry representatives say the measure has potential impacts on the U.S. job market, trade, supply chains and inflation.

“This is a modest measure in terms of immigration changes, so I think it would have little effect on job growth and economic expansion,” he said. said Ernie Tedeschi, economic director of the Budget Lab at Yale University. Tedeschi previously served as chief economist at the White House Council of Economic Advisers.

The order is also designed to serve as Biden’s policy response to public anger over a surge of undocumented immigrants. That frustration has become a liability for voters ahead of Biden’s likely November rematch against former President Donald Trump.

But border policy also impacts how businesses trade, hire workers, and set prices for consumer goods — all of which impacts the health of the U.S. economy.

For now, experts believe that the short-term economic impacts will be relatively limited. Specifically, the new asylum limits could slightly dampen growth in the U.S. labor market. But they could also help unclog the supply chain at the border and streamline trade with Mexico.

If the new border measures hurt the economy, experts say the problem will likely manifest in the job market.

If the border temporarily stops accepting new asylum seekers under Biden’s executive order, the slowdown in immigration could slightly dent the strong U.S. job market, which has already shown signs of slowing.

“I would expect the (employment) numbers to cool down a bit,” Tedeschi said. “I would also expect many immeasurable effects: for example, a company having a little more difficulty finding the workers it needs to open a new location.”

Since 2019, immigration has added 2 million workers to the U.S. labor supply, according to an April analysis by Tedeschi. Without immigrants, Tedeschi estimates that the size of the U.S. labor supply would have declined by 1.2 million during this period.

“A steady influx of immigrants is essential to ensure that the U.S. workforce can continue to grow,” said Tara Watson, an economist at the Brookings Institution.

Immigrants have also helped boost the United States’ post-pandemic economic recovery, which has outpaced developed countries around the world, despite its many hiccups.

Tedeschi estimated that immigrants accounted for a fifth of the pandemic growth in U.S. gross domestic product.

The short answer is that this executive order probably won’t increase inflation.

“Immigration has an ambiguous effect on inflation, in that immigrants increase supply but also bring additional demand,” Tedeschi explained.

Some experts say the executive order could actually reduce costs by smoothing the supply chain between the United States and Mexico.

Shipments at the border are sometimes blocked because Customs and Border Protection, or CBP, officers are busy trying to process overwhelming numbers of migrants.

“When you slow down that supply chain, it costs everyone money,” said Jerry Pacheco, president of the Border Industrial Association, a New Mexico trade group that represents more than 100 companies that rely on Mexican producers. .

These high production costs can ripple through the entire economy.

“It’s like a hot potato. It gets passed from logistics companies to manufacturers and the manufacturers pass it to us consumers. It has a profound negative impact on our economy,” Pacheco said.

Biden’s executive order could help eliminate some of these supply chain bottlenecks. By limiting the number of migrant crossings, CBP officers would have more time to facilitate faster shipments with Mexico.

“This probably should have been done a year ago, two years ago,” Pacheco said.

Despite some of the potential economic benefits of Biden’s border policy, Pacheco said the best border policy for the economy and workforce would be one that provides a long-term solution to the “immigration and visa system broken” of the country.

Watson, of Brookings, agreed. “The best way to manage the situation at the borders would be to create more regular legal channels,” she said.

In the meantime, Biden’s new executive order is expected to have smaller economic and humanitarian effects than the mass border closures and sweeping expulsion strategies proposed by Trump and some Republicans.

Experts say draconian immigration policies could fan the embers of inflation that the Biden administration is working to stamp out.

“I always used to laugh when former President Trump would say that,” Pacheco joked, referring to Trump’s promise to close the border.

“I mean, it would be like taking a shotgun, not a pistol, and shooting yourself in the kneecap.”

A Trump campaign spokesperson did not immediately respond to a request for comment from CNBC on the impact of Trump’s immigration proposals on inflation and the cost of goods.