The US experienced an extraordinary surge in immigration between 2021 and 2024. At the same time, a period of disinflation ensued after headline inflation reached its highest level in four decades in mid-2022. This raises the question of whether the immigration surge cooled an overheating labour market and contributed to disinflation or whether the accompanying boom in consumption and investment boosted inflation.

Several recent articles consider this question for the US. Cohen (2024) argued that immigration helped restore labour-market balance and ease wage pressures. Edelberg and Watson (2024) showed that, once the new inflows are considered, ‘break-even’ employment growth is much higher than previously thought, implying less labour-market overheating than headline payrolls suggested. Orrenius et al. (2025) suggest that the reversal of these flows since 2024 may have weighed on output growth. 

This question is also important globally as push-pull factors like war, famine, political dynamics, employment opportunities, and immigration policies abroad impact individuals’ decisions to relocate. As a recent example, Caselli et al. (2024) emphasised gains to potential output and the easing of labour shortages in the EU due to arriving refugees following the start of the war in Ukraine.

In recent work, we examine the inflationary implications of the US immigration surge (Cheremukhin et al. 2026). We combine publicly available administrative data, survey microdata, and a calibrated model with multiple household types. Our key finding is that the disinflationary supply-side and inflationary demand-side effects of the 2021-2024 surge approximately cancelled out, meaning the surge had a negligible impact on US inflation. 

A surge unlike any in recent history

According to the Congressional Budget Office, net immigration to the US rose from roughly one million per year over 2000-2019 to a peak of about 3.3 million in 2023, raising annual population growth from about 0.6% to 1.1% (Figure 1). Cumulatively, 10.5 million net immigrants arrived between 2021 and 2024.

Figure 1 Net immigration to the US, 2000-2024 (millions per year)

Source: Congressional Budget Office, “An Update to the Demographic Outlook, 2025 to 2055.” 

One unique aspect of the immigration surge is that the bulk of the inflow consisted of unauthorised immigrants, including individuals who entered without legal status, were paroled at the southern border, or were awaiting immigration-court proceedings. In contrast, authorised flows (including lawful permanent residents and temporary visa holders) returned to their pre-pandemic level after a temporary dip in 2020 and 2021.

A second important fact is that the surge originated in a handful of Central and South American countries (Mexico, Venezuela, Guatemala, Honduras, Cuba, Colombia, Haiti, Nicaragua, El Salvador, Ecuador, and Peru), which accounted for 80–90% of border encounters and immigration court filings during the surge. We refer to these as ‘high-encounter’ (HE) countries. 

Finally, the surge was national rather than concentrated in states along the US southern border. Immigration court records show that 39 states absorbed inflows above 0.5% of their 2021 population. 

This composition matters. Most existing US immigration research examines legal and skilled inflows, the pattern before 2020. Some recent studies have used the average immigrant in the Current Population Survey (CPS) who arrived in the US after 2020 to determine the labour market characteristics of post-pandemic immigrants. However, this paints a biased picture of these immigrants, because surveys typically undercount unauthorised respondents (Brown et al. 2023). Using country-of-origin and arrival time information, we identify the cohort that drove the surge and document three stylised facts.

Three facts about post-pandemic immigrants

Fact 1: They are low-skilled. Using the monthly Current Population Survey (CPS), 64% of new high-encounter immigrants hold a high-school degree or less, compared with about 30% for both natives and new non-high-encounter immigrants. They earn on average roughly half the wage of native workers and are heavily concentrated in lower-skilled industries.

Fact 2: They behave like hand-to-mouth consumers. Drawing on the Panel Study of Income Dynamics (PSID), the consumption-to-income ratio of new high-encounter immigrant households is about 83%, against 66% for natives. Their liquid wealth covers less than one month of consumption, compared to seven months for natives. About 63% of new high-encounter immigrant households are hand-to-mouth (i.e. households whose liquid savings are less than half their per-pay-period earnings), compared with 38% of natives. 

Fact 3: These features are persistent. The labour market and consumption–savings characteristics of high-encounter immigrants change little after their arrival. Earlier high-encounter cohorts who arrived between 2015 and 2019 look very similar to those arriving after 2020, and event-study analysis shows only modest changes over time in labour force participation, wages, sectoral concentration, and hand-to-mouth status. 

A Wicksellian tension

The macroeconomic effects of a population shock involve two competing forces, an idea articulated by Knut Wicksell in 1901. On the one hand, the presence of more workers expands productive capacity, easing cost pressures. On the other, the additional workers also consume and require capital to work with, raising aggregate demand. The net effect on inflation is therefore theoretically ambiguous and depends on the relative size of these forces.

We embed Facts 1–3 in a macroeconomic model with population growth, three household types (high-skilled, low-skilled savers, and low-skilled hand-to-mouth), and capital-skill complementarity in production. The supply-side channel is straightforward: a surge of low-skilled workers expands hours and output, lowers low-skilled wages, and is disinflationary. The demand-side channel has two components. Investment rises as firms equip the new workforce, although capital-skill complementarity dampens the response. Consumption rises because the population is larger and a sizeable share of the new arrivals is hand-to-mouth.

Figure 2 Model-implied impulse responses to the US immigration surge

Notes: The inflation rate response is shown in annualised percentage point deviations from steady state. Output, consumption, and investment are shown in percent deviations from the pre-shock trend.
Source: Authors’ calculations based on the model in Cheremukhin et al. (2026).

In the calibrated model, these two channels approximately cancel (Figure 2). The peak response of annualised inflation is only about five basis points, and the result is robust across a wide range of alternative price-stickiness parameters, capital-skill-complementarity estimates, labour supply elasticities, and monetary-policy rules. By contrast, aggregate output responds persistently, rising by around 0.5% over the medium run.

Implications for policy

The first implication is for monetary policy. Aggregate output rises persistently in response to the surge, but potential output rises one for one, so the output gap barely moves. The combination of a muted inflation response and an essentially unchanged output gap suggests that policymakers should be careful not to overreact to this type of low-skilled immigration shock. This caution is even more relevant considering the post-2024 reversal in immigration flows. 

The second implication is related to the immigrant composition. As a counterfactual, we examine a same-sized surge concentrated in high-skilled workers, the pattern of US immigration before 2021. Since high-skilled labour is more complementary to capital, investment responds more strongly, the demand side dominates more clearly, and the inflation response is larger. Even so, the peak inflation impulse remains modest, roughly 10-15 basis points in annualised terms. Composition matters for the macroeconomic footprint of immigration, but neither composition would have generated a quantitatively large inflationary impulse.

The third implication is comparative. The European immigration surge analysed by Caselli et al. (2024) was led by Ukrainian refugees with substantially higher schooling than those arriving at the US southern border, like our high-skilled counterfactual. This suggests the inflationary footprint there should also be modest, although differences in refugee reliance on public transfers, integration speed, and inflow size relative to GDP could shift the magnitude. 

Post-pandemic inflation in the US has many drivers: supply-chain disruptions, energy prices, accommodative monetary policy, fiscal stimulus, and a tight labour market. Our analysis indicates that the US immigration surge was not a meaningful net contributor to aggregate inflation in either direction. 

Authors’ note: The views expressed in this column are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

References

Brown, J D, M L Heggeness and M Murray-Close (2023), “Noncitizen Coverage and Its Effects on U.S. Population Statistics”, US Census Bureau CES Working Paper 23-42.

Caselli, F, A G Dizioli and F Toscani (2024), “Macroeconomic implications of the recent surge of immigration to the EU”, VoxEU.org, 14 October.

Cheremukhin, A, S Hur, R R Mau, K Mertens, A W Richter and X Zhou (2026), “The Postpandemic U.S. Immigration Surge: New Facts and Inflationary Implications”, NBER Working Paper 35168.

Cohen, E (2024), “Rising Immigration Has Helped Cool an Overheated Labor Market”, Federal Reserve Bank of Kansas City Economic Bulletin, 22 May.

Edelberg, W and T Watson (2024), “New Immigration Estimates Help Make Sense of the Pace of Employment”, The Hamilton Project, Brookings Institution, 7 March.

Orrenius, P, G Ozor, M Zavodny and X Zhou (2025), “Declining Immigration Weighs on GDP Growth, with Little Impact on Inflation”, Dallas Fed Economics, Federal Reserve Bank of Dallas, 8 July.