Federal Reserve Chairman Jerome Powell suggested migrants are helping drive rising unemployment during a press conference on Wednesday.
Powell spoke to reporters after the Fed announced it would lower its federal funds rate by 0.50% following disappointing job growth in both July and August. Unemployment currently sits at 4.2% — up from 3.4% in April 2023 — in what Powell suggested was largely a product of migrants crossing into the United States.
“There’s been quite an influx across the borders, and that is actually one of the things that’s allowed the unemployment rate to rise,” Powell told reporters at the press conference.
Over 10 million migrants have crossed the border illegally since President Joe Biden took office in Jan. 2021, the Washington Examiner reported in October 2023. Over 500,000 Cuban, Haitian, Nicaraguan and Venezuelan migrants have been flown into the country and granted parole under an initiative launched by the Biden-Harris administration.
The enormous influx of migrants have overwhelmed cities such as Springfield, Ohio, where the median rental price leapt more than 40% in September compared with 2023, following the arrival of more than 15,000 Haitian migrants.
Rising unemployment has driven fears of economic recession in recent months, and resulted in a global stock market sell-off in early August, with Tokyo’s Nikkei 225 Index falling 12.4% in a single day — its worst single-day retreat since the 1987 “Black Monday” crash, according to the Financial Times. The U.S. S&P 500 also fell amid the sell-off, slipping roughly 3% in what was its largest fall since late-2022.
The rate cut will reduce the cost of capital, potentially bolstering gross domestic product (GDP) by freeing up capital for businesses and consumers alike. Expectations of accelerated GDP growth could then also provide the stock market with a boost, as it did when the Fed signaled in December 2023 that it would reduce rates this year, and thus could aid Harris’ election chances.
Positive S&P 500 performance in the three months before an election has accurately predicted that the incumbent party would win the presidency 83% of the time since 1928. Over 80% of registered voters say the economy will have a strong influence on which candidate they select in 2024.
In addition to rising unemployment, Wednesday’s rate cut comes amid falling inflation, with inflation dropping from 9.1% in June 2022 all the way down to 2.5% in August — just half a percentage point from the Fed’s 2% target rate. Much of the damage from peak Biden-era inflation is still being felt, however, with prices up more than 20% since he took office in Jan. 2021.
Inflation was just 1.4% at the end of Former President Donald Trump’s term. Trump nominated Powell as Fed Chairman in Nov. 2017, according to the BBC, but later grew critical of him and claimed in 2023 that he would not reappoint him if elected.
“I would not reappoint him. I thought he was always late, whether it was good or bad, but he was always late,” Trump told Fox Business’ Larry Kudlow on Aug. 17. “I was surprised he was reappointed — probably got reappointed because they knew I didn’t like him much.”
The Federal Reserve did not immediately respond to a request for comment.
Featured Image Credit: Federalreserve
