This podcast discusses the potential negative economic consequences of restrictive immigration policies in the U.S. Michael Gapen, Morgan Stanley's Chief U.S. Economist, explains how reduced immigration could slow GDP growth (by 0.5% this year and potentially more next year), increase inflation, and impact labor markets, creating a "two-speed" labor market with slower employment growth but low unemployment. He cites a significant drop in immigration rates from over 2 million in 2024 to an estimated 1 million in 2025 and 500,000 in 2026, impacting population growth and labor supply. Gapen concludes that these factors could lead to tighter monetary policy and fewer Fed rate cuts than previously anticipated. The analysis uses data from the Bureau of Labor Statistics and Morgan Stanley's 2025 Year Ahead Outlook.
