Surging immigration will boost the US labor force and send GDP higher, Goldman says

• The US economy is set to grow faster because of a surge in immigration, according to Goldman Sachs.
• The bank raised its 2024 GDP forecasts because of the increased labor supply due to immigration.

Economic growth in America is set to accelerate amid a period of surging immigration, according to Goldman Sachs.

The bank boosted its 2024 GDP forecast in a note on Sunday, arguing that a jump in labor force growth via elevated immigration will drive the US economy higher.

"Elevated immigration has boosted labor force growth and, by extension, potential GDP growth," Goldman Sachs said.

The bank highlighted recent studies that suggest immigration was 1.5 million above the trend of about one million in 2023. The jump in immigration should continue in 2024, according to Goldman Sachs economist Ronnie Walker.

"We expect immigration to be about 1mn higher than usual this year, implying breakeven job growth of around 125k and a 0.3pp boost to potential GDP growth in 2024 from faster labor force growth," Walker said.

The sharp increase in immigration should lead to higher monthly payroll reports, with Goldman Sachs increasing its average monthly job gains in 2024 to 175,000 from 150,000.

And as more people hold jobs in America, consumption trends should continue to rise, further driving economic growth.

The bank boosted its 2024 real GDP growth estimate to 2.4% on a fourth-quarter over fourth-quarter basis, and to 2.7% for the full year, according to the note.

"Our estimates imply that above-trend immigration will boost potential GDP growth by 0.3pp in 2024. Together with economywide productivity growth of 1.5% and a 0.3pp contribution from labor force growth implied by demographic trends and historically average net migration, we estimate that potential GDP growth will be roughly 2.1% in 2024," Walker explained.

Goldman Sachs' bullish forecast on the US economy, driven in part by immigration trends, follows a report from the CBO in February that said the US economy will grow by an extra $7 trillion over the next decade due to elevated immigration trends.