Federal Reserve Chair Jerome Powell tied the nation\u2019s cooling job market directly to President Donald Trump\u2019s restrictive immigration policy on Wednesday, a rare instance of the central bank chief singling out White House decisions as a driver of economic weakness.<\/p>\n
When pressed by reporters on why hiring has slumped, Powell responded: \u201cThat\u2019s much more about the change in immigration,\u201d He continued, \u201cThe supply of workers has obviously come way down. There\u2019s very little growth, if any, in the supply of workers. And at the same time, demand for workers has also come down quite sharply, and to the point where we see what I\u2019ve called a curious balance.\u201d<\/p>\n
Typically, a balance between job openings and job seekers would be good news. But Powell said the current equilibrium is unhealthy since both supply and demand are shrinking together, with demand falling faster.<\/p>\n
\u201cNow demand [is] coming down a little more sharply, because we see, we now see the unemployment rate edging up,\u201d he added.<\/p>\n
The Fed cut interest rates by a quarter percentage point on Wednesday in what Powell described as a \u201crisk management cut,\u201d aimed at cushioning the economy against further job losses, while stressing policy is moving \u201ctoward a more neutral policy stance\u201d and is \u201cnot on a preset course.\u201d<\/p>\n
Trump\u2019s immigration crackdown has worked through several channels at once.<\/p>\n
First, the administration is deporting<\/a> \u2013 according to their claims<\/a> \u2013 roughly 750 immigrants. The CBO has estimated that 290,000 immigrants will be removed between 2026 and 2029, a shift that economists have warned<\/a> will weigh on GDP growth and shrink the labor force.<\/p>\n Secondly, the deportations create a chilling effect on both legal and illegal immigration, where Moody\u2019s Chief economist Mark Zandi estimated<\/a> the annual number of immigrants entering the country, legal and undocumented alike, has fallen from roughly 4 million at the 2023 peak to just 300,000\u2013350,000 now. He also projected that the impact of fading immigration will boost inflation to around 4%<\/a> by some time early next year, further complicating Powell\u2019s task.<\/p>\n