Immigration is likely the main reason the labor market is gradually moving from very overheated to less overheated.
Over the past 2½ years, immigration into the US labor market has increased by 4 million workers, and the working age immigrant population is now back at its pre-pandemic trend, see chart below. This number can be compared with the 4 million people in the US who are out of work because of long covid, see also this Brookings paper.
High immigration contributes not only to strong job growth, including in leisure and hospitality, but also to limiting the upside pressure on wages, see the second chart.
The bottom line is that high immigration is helpful for the Fed as it tries to cool down the labor market and slow down inflation.
Our employment outlook chart book is available here.
Source: BLS, Haver Analytics, Apollo Chief EconomistSource: BLS, Haver, Apollo Chief Economist
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