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The cable TV networks, even Fox News, almost reluctantly reported on the June inflation numbers. The pre-announcement predictions (8.8%) were bad enough, but 9.1%? And wholesale prices above 11%? These figures indicate a shrinking retail margin, never a good sign and an anomaly: how can inflation, purportedly caused by short supply issues and high demand, be coupled with a shrinking retail margin, an indicator of discounts employed to spur demand? And what of unemployment? It is at near “full” employment levels, stuck at 3.6%. Overall employment numbers show a reduction in overall employment (jobs) in the month with a corresponding increase in the number of those who chose not to participate in the workforce (excluding the unemployed seeking jobs).
These figures are indicators of an economy in trouble, of a recession. Despite what would appear to be near full employment, with a “we’re hiring” sign on the door of virtually every business in America, real wages are down. This defies conventional economic understanding. There is an obvious need for workers and an increasing number of people are choosing to remain on the sidelines, yet, real wages are down 3.6%. When combined with record inflation (and with prices pushing historical levels) this creates a kind of double secret inflation; these rates together comprise a modern-day measure of stagflation, a misery index of, wait for it, 12.46%.
There is, however, something else going on here — something discordant and unexplained. How can wages be depressed in a low unemployment economy with declining labor participation? These trends would indicate an increased demand for labor and any reasonable economist would expect a commensurate rise in real wages.
Can immigration explain this anomaly? Legal immigration figures are presumably integrated into the Employment Situation survey figures, but what of illegal immigrants? This might well be a massive blind spot in the monthly Labor Department Employment Situation survey.
The number of illegal persons who are expected to enter the US at our southern border in fiscal 2022 is estimated to exceed 3 million. Fiscal Year 2021 illegal immigration has been estimated at just shy of 2 million. Both of these figures may understate the actual figures. In addition, more than 80% of these illegal entrants are presumed to be working-age adults, most of them single. Their options for economic help in the US are limited (welfare), and to survive, they must work. And they do work. They are lucky. Successful, illegal immigrants who arrived before them have found ways to survive and even thrive. They’ve found ways to skirt work-status checks, to enter and participate in US commerce, to pay taxes, even to build businesses and buy property even if they cannot obtain a conventional mortgage or business loan.
Illegal workers are largely hidden from the Employment Survey. The result, amid what appears to be a declining employment participation rate and low unemployment, is that 2% of the workforce (or more if considered cumulatively) is illegal and not considered in the numbers. Unemployment figures are understated, likely by at least 2% or more, making the “real” US unemployment rate something more in the vicinity of 5.6% or higher.
That’s how there can be low reported unemployment rates and declining real wages. There is actually a glut of people seeking employment; they are just hidden in the shadows of illegal immigration.
This is not good news. This Biden recession, which is not yet acknowledged but is certainly here to stay, will eventually result in the shedding of jobs in corporate America. Marginal businesses will fail. Large employers will downsize and shed struggling business units. The reported employment situation will only get worse.
And so will the modern-day misery index.
Our only consolation is that despite the old bromide, misery does not like company. Illegal migration, despite open borders, free plane tickets, and new cell phones, will decline just as gas prices will as everyone hunkers down to weather the latest self-inflicted, left-inspired, economic meltdown. Illegal immigrants will not risk paying the cartels for entry if the US economy slumps and they cannot find work.
In the meantime, we should build the wall.Published in