A notable occurrence is expected next week: Donald Trump could receive favorable media attention due to an unprecedented rise in immigration. Conversely, this situation poses challenges for Keir Starmer and Rachel Reeves in the UK.
Both scenarios relate to how data from the labor market addresses the larger-than-expected population size. However, the implications differ on each side of the Atlantic.
Recently, the UK’s Office for National Statistics revised its estimates of net immigration for the two years ending in December 2023, revealing that approximately 300,000 more people had arrived and remained in the UK than initially estimated, marking a 20 percent increase. This adjustment, along with revised underlying assumptions, contributed to updated population forecasts released earlier this week.
In comparison, the US Census Bureau made significant upward revisions to its estimates for net immigration in 2022 and 2023, increasing the figures by nearly 90 percent — from 2.1 million to 4 million — and adding another 2.8 million for 2024. Consequently, it is believed that US population growth last year was among the fastest in recent decades.
These revisions are beneficial, as they reflect improvements in how immigration is accounted for, primarily through more accurate and timely administrative data rather than relying solely on surveys. Having accurate numbers is preferable to maintaining outdated figures.
However, such substantial changes do not just affect our understanding of population size and growth rates; they also impact economic indicators, including labor market statistics.
The upcoming US jobs report will include various revisions to the foundational survey data, notably the significant adjustment in population size. Research indicates that contrary to previous assessments, the new data is likely to show that native-born Americans are not losing out in the job market to immigrants; in fact, employment among US-born individuals is on the rise.
Previously underestimated population figures led to a distorted view of employment levels derived from major household economic surveys, which wrongly suggested a decline in employment for native-born individuals. In reality, despite a decreasing share, the total number of native-born employed individuals increased due to high population growth.
In the UK, however, the impact of similar revisions is markedly different. Ongoing issues with the UK’s labor force survey have resulted in a shift toward using administrative data to gauge the labor market, revealing that the number of payroll employees in the working age group remained flat for much of the previous year before decreasing.
Crucially, since these figures are based on tax records rather than survey data, the unexpectedly high population numbers inflate the overall employment rate denominator without affecting the numerator proportionately, unlike the US scenario. This leads to a significant decline in labor market conditions as robust population growth contrasts with stagnant employment figures.
The count of working-age employees in the UK saw a year-on-year decrease of 0.2 percentage points, but when expressed as a proportion of the population, the drop approached a full percentage point — the most significant decline since 2008, excluding the pandemic. While the labor market loosening in 2008 was mainly due to job losses, the current situation is primarily driven by an increasing population entering the job market.
The depth of this downturn might be an underestimated figure, as some newly arrived individuals may be self-employed or engaged in other employment types that the UK’s tax-based statistics struggle to capture. Nonetheless, a clear trend of population growth surpassing job growth is evident.
While statistics regarding population and workforce numbers may seem definitive, ongoing revisions and methodological differences underscore the unstable narratives that often arise from them. The overall understanding becomes more refined over time, albeit with occasional unclear periods.
photo credit: www.ft.com
