From spending to housing, here's how immigration will fundamentally affect different areas of the economy

NEW YORK CITY - Recent reports have shown the U.S. economy is projected to continue growing in the coming months. As the increase of the population has played a key factor in tihs, economists are looking at specific sectors of the economy to base their predictions on and see the impact of further immigration in the future.

A recent Congressional Budget Office report estimated higher levels of immigration than previously thought, according to Bloomberg News. With over a million people entering the country each year, the news outlet explains that this stands to create increased demand for housing and a wide range of other goods and services.

"The flows that we've seen over the past two years have to be having some sort of an impact on the broader economy," Stephen Stanley, chief economist at Santander US Capital Markets LLC, told the outlet. "The question isn't whether it's happening or not, it's how much it's being captured in the numbers."

As immigration continues to be a present trend in 2024, economists are focusing on four specific factors that could drive to more economic growth.

The labor market is one of the areas looked at by economists when assessing the impact of immigration.

Job gains have consistently topped forecasts over the past couple years, and the number of employed foreign-born workers rose to a record this past March. Meanwhile, the unemployment rate has been under 4% for more than two years and is seen holding steady at 3.8%.

At the same time, many jobs economists see immigrants as more likely to take— including construction, household cleaning, home health aides and more— are showing strong growth, with employment levels in those sectors at or above their pre-pandemic trend.

"The reason you're seeing sturdy continued payroll prints and the unemployment rate maintaining is that you're simply seeing higher population growth," said Brett Ryan, senior US economist at Deutsche Bank AG. "The Fed looks at that as a supply-side boost. You could have a stronger growth profile without stoking inflation.

Spending and inflation are other factors looked at by analysts.

With more people entering the country, there's also more demand for necessities like food, clothing and shelter. In March, retail sales topped forecasts and inflation-adjusted consumer spending advanced by the most this year.

Immigration is also set to affect the housing market, whether it is directly or indirectly. While the newcomer likely won't be looking to buy homes soon, analysts are looking at renting resources to see if and where prices might increase.

Similarly, with more people in construction, it is likely that more homes will be built, and building projects will finally be finished. This could help alleviate pressure on home prices, a major issue the country has grappled with since the 2008 financial crisis.

Finally, given that consumer spending is the primary driver of U.S. gross domestic product, economists are projecting an increase in their forecasts.

"At its most basic, GDP is the sum of population growth and productivity growth," Ryan said. "When you're raising population growth, you're raising spending growth. And if you have more spending growth, you have more things to spend on and more production to meet that spending."