Marketplace - Why The Fed Is Thinking About Immigration

Episode Date: January 11, 2026

Federal Reserve Chair Jay Powell’s latest presser was all about the job market. Buried among the usual talking points, like hiring sentiment and the unemployment rate, was immigration. That’s because the current administration’s immigration policies are complicating Fed measures of labor market health. In this episode, falling immigration turns jobs data on its head. Plus: Robust economic growth comes without typical job creation, U.S.-China trade tensions cool, and one company teaches AI to sort your trash.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.

On the program today, we'll take another couple of passes at the Fed meeting. We'll talk China for a bit. And AI comes to your recycling bin. From American Public Media. This is Marketplace. In Los Angeles, I'm Kai Rizdahl. It is Thursday, today the 11th of December. Good as always to have you along, everybody.

As usually happens, Chair Powell covered a lot of ground in his post-meeting press conference the other day. the central bank's balance sheet was a topic of conversation, what he thinks tariffs are doing to inflation, what he wants his legacy to be, seeing as how he's only got three meetings left before running this economy as somebody else's job. Also, immigration and the macro economy. He talked about how job gains have slowed significantly since earlier this year and how that's likely connected to the Trump administration's immigration policy. And it turns out, as Marketplaces Elizabeth Troval is about to tell us, not only is immigration a labor market, story? It's a monetary policy story, too. To support stable prices and maximum employment, the Fed must decide whether Labor Department data is hot or cold. But to understand that, you have to understand what's happening with the immigrant population. Michael Strain with the American

Enterprise Institute says that's because immigrants made up a huge number of new job seekers under President Biden. But unemployment was steady because massive amounts of new jobs. jobs were also created. If we had a month where the economy added 250,000 net new jobs, you know, that looked like a decent month. Those new job seekers from other countries found jobs. But if the number of foreign-born people drops dramatically as it has under President Trump relative to President Biden, then the number of net new jobs you need for a decent month drops dramatically. drops dramatically. Now, there are far fewer new job seekers out there because of restrictive immigration policies. So the goalposts for what healthy job growth looks like changed. That could

make for some pretty interesting labor data ahead, says economist Yelena Shalitova with the conference board. We could be in an awkward situation when we have a few months of negative payrolls growth, but not in a recession. And it could be like close to zero and still be considered as a relatively healthy labor market. Part of why these things can balance out is because immigrants aren't just workers. Their consumers, too, says Wendy Edelberg with the Brookings Institution. They are neither supplying their labor nor spending money in the U.S. And so what this means is that the current immigration policy is not just reducing labor

supply. It's also reducing how many people employers want to hire. immigrants who have left the U.S. are no longer buying goods and services here, and that eliminates the demand for certain jobs. I'm Elizabeth Troval for Marketplace. Wall Street, day two out of three, new record highs. Thanks again, Jay Powell. We'll have the details when we do the numbers. One of the things the president talks about when he talks up his tariffs is that they give him leverage over other countries, which yes, sometimes for sure. With China, though, not so much. So we are going to talk for a little bit about the state of play between the world's two biggest economies. Adam, Pozen is the president of the Peterson Institute for International Economics.

Adam, welcome back to the program. I was good to have you on. Glad to be with you, Ty. Let's do a level set here. The temperature of the U.S. China relationship today versus, oh, say, January 21st. A lot closer to normal, a lot cooler. Well, I mean, too cool is bad, too hot is bad. It's a lot more temperate.

How come? What has been happening just sort of? sort of behind the headlines that are making this all seem the way it is? I think there are a few things going on, but they all converge. So one thing which was very important was a month and a half ago or so. The members of the We Hate China Commission, which is the U.S. China Security Commission, went to China, met with everybody senior except she, made constructive noises that I think are positive about having more military-to-military contact, having reasonable discussions about economic

balances and what constitutes an export control that's worthwhile or not. And that laid the groundwork that Trump wouldn't get outflanked by people in Congress saying, oh, you have to be more harsh with China. And then finally, we have a situation where, for all that China is dumping exports on the rest of the world, it's partly due to its own weakness, and it's not having that much effect on the U.S. at this point because our economies have disengaged. The other point, though, is that Trump found out that he doesn't have the leverage over China that he does over others. Right. I want to talk about that weakness domestically in China, and I want to do it on a news

item that you alluded to a little bit. The news a couple of days ago, whatever it was, that China's trade surplus hit a trillion dollars. Yay for Chinese exporters, but that does point up some domestic weakness in that economy. Absolutely. Generally, though, you get a trade surplus in large part when your domestic demand is weak, when your consumers are too scared to consume or too busy saving, when you're getting low returns on your economy, so investors are not putting money in it. That's when you end up exporting more than you import. And that's what's going on in China. for a few years now, partly because of a real estate crash and partly because President Xi spooked the heck out of average Chinese property rights being safe or not.

Consumers aren't consuming. Small businesses aren't investing. And in fact, even manufacturing in China has been slowly trending down. So, yeah, they got a lot of exports and that's annoying a lot of people, but it's not a sign of robust health. With the caveat that you are an economist and not a political scientist, there is a national security thing that I want to talk about with you. And that is the news earlier this week that President Trump is going to let

Nvidia sell some of its high-powered, not highest-powered, but some of its grade A chips to the Chinese. And of course, that is raising national security. And military concerns also the president's doing taking 25% off the top from Nvidia on that one. So I guess the question is twofold. What's your level of concern about national security? and also this is another step towards state capitalism by the Trump administration. Yeah, I'm concerned about both, Guy. You're right to raise both of them.

As a colleague of mine at the Peterson Institute, Mark Schempa, has argued, and others on the inside have argued, you know, there is a case to be made that you don't bother putting export controls on things that China can get anyway because then you just lose the sales, but you don't really set them back. So there's a legitimate debate about if Huawei or others can produce something similar, why not let Nvidia sell? The problem is this change in policy isn't being driven by that. It's being driven, as you indicate, by a disregard for national security rather than a balancing. You know, if you think companies should be taxed, then tax them. But don't say, oh, you're going to give me a private deal because I'm interested in this particular good. I mean, that's how third world potentates, whatever that nasty phrase Trump uses for bleephole countries. That's how they behave.

That's not how free market economies that actually work behave. Let me get you back to the beginning and the level set and the normal-ish state of Sino-American relations right now that you posit that we're in. Is it sustainable, do you think, over the rest of this Trump term, given the president's, a quick two-changes mind attitude on a lot of things, but also then over the longer term. I mean, you know, it's not like the Chinese are going away. It's not like we're going away. Exactly. I think that's the fundamental piece of wisdom without sounding to either Confucian or Hamiltonian

that both China and U.S. are large, are less vulnerable to the rest of the world and to the world economy than they sometimes portray themselves. and you just have to have a policy that reflects that reality. Now, the status quo, I think, can largely persist, but it is better than provoking fights with China or trying to exert sense of we're about to lose to China or China could be changed when neither of those is really relevant. Adam Posen is the president of the Peterson Institute for International Economics.

Adam, thanks for coming on. Really good to talk to you, as always. Thank you for having me, Kyle. Hey, stop me if you've heard this one before. Without timely government data, it's really hard to see where this economy is at, much less where it's headed. On the list of things not yet delivered is retail sales. We'll get the delayed October report next week.

No clue at all when November numbers are going to be here. So in the indefinite interim, to fill at least a small part of that gap as best we can, we've called one of our regulars, Wesley Rule, of Knoxville Fine Violins. Business has been okay, actually. I was looking at the numbers. I think that we've grown, sales went up about 20% from last year. It's a time that a lot of rentals go out because, you know, you have kids that are asking for violence for Christmas and maybe parents don't want to spend $650 on a violin. So they rent one to see how it goes. So we have been sending out a lot of rentals. This is sort of high symphony season. There's a lot of,

lot of orchestras that are playing through their, you know, concerts. We get a lot of professionals coming in with their instruments where it's like, oh, we turn the heat on. And my instrument now no longer sounds the way that it did. And so now we have to do some sort of adjustment because it's a natural material. So it's shrinking and expanding. I don't do it in just eight hours. I'm spending more like 10 hours a day.

And, of course, our employee is working as much as he can. My wife Lauren has been immensely helped. just doing all of those routine things, doing school deliveries or entering bills or just coming in and cleaning instruments that have been returned. I've been doing everything as much as I can, almost maybe more than I should. I pulled up muscle in my back the other day and I've been recovering from that. But yeah, it's pretty typical this time of year. And then, of course, after Christmas, things kind of drop off a little bit. I think back in May we had to take out a bit.

business loan in order to purchase instruments at pre-tariff prices. And we ended up buying quite a bit, and it's really paid off for us because we've been able to use those. We haven't paid off the loan yet, but I'm not worried about it. It seems like everything's going to work out pretty well. We'll start paying it off at the beginning of the year. We shut the shop down from Christmas Eve, which is my birthday, through New Year's Day. And, you know, we always, everybody comes in. We do inventory during that time and we do some other business things, but we always take that off just so that we and our employees can spend time with family. We're going to have a shop Christmas party where we have everybody come over. That'll be fun, I hope, and, you know, cook some good food and

just enjoy each other's company. Wesley Rule, proprietor with his wife Lauren of Knoxville Fine Violins. Just as you may think, it's in Knoxville, Tennessee. Coming up. So that's our data, that's our fuel. But yes, that's garbage. Well, okay then. First, though, let's do the numbers.

Dow Industrial's up 646 today. One and a third percent closed at 48,704 did the blue chips. The NASDAQ dropped 60 points, about one quarter of 1%. 23,000 to 593. The S&P 500 up 14 points. Two-tenths percent, six-niner-zero. Oracle shares took a tumble today and dragged down the NASDAQ. That's what was going on there.

Came after the cloud computing company's earnings call stoked fears once again, once again, rather, of an AI bubble. I was going so fast. I couldn't wait to get to those phrases. AI bubble. Oracle down 10.8% InVIDIA, it makes chips. Maybe you've heard of it. Actually, it designs them.

Dipped one and a half percent. Disney is making a $1 billion investment in OpenAI. Characters including Mickey Mouse, Ariel, and Cinderella will be licensed for use in chat GPT, images and SORA videos. I insert here this thought. What could possibly go wrong? The Walt Disney company added 2.4% on the day. Bond prices went up when that happens. The yield goes down. Yield on the 10-year treasury note dipped to 4.15%. And you're all listening to Marketplace. This is Marketplace. I'm Kai Risdahl. One more crack at the Federal Reserve on this Thursday, digging a little bit deeper into why the Central Bank is thinking what it's thinking, which, based on some of the

projections from yesterday suggest they expect decent economic growth, but not necessarily more jobs. Here's Charpal answering the why question. The implication is obviously higher productivity. And some of that may be AI. Also, I think productivity has just been almost structurally higher for several years now. Productivity, widgets produced for hour worked. Where, though, are those gains coming from? And why are they going to matter? Here's Marketplace's Nova Saffo. The economic data right now is a bit of a conundrum, says Josh Hurt, senior U.S. economist at Vanguard. We're seeing, you know, very low job creation, but we're seeing, you know, reasonably strong GDP numbers. And this is what Fed Chair Jerome Powell was alluding to as well, the economy growing without adding jobs.

How? There's one element that sort of squares some of that, and productivity could be the answer to that. Remember, it wasn't that long ago that employers were having trouble finding enough workers. Many turned to automation, and over the last couple of years, the results have been adding up. We are certainly seeing areas like transportation and logistics, certainly leveraging technologies to make more efficient some of the transportation routes. Productivity gains have been concentrated among retailers and the services sector. Amazon this year deployed its one-millionth warehouse robot, fast food restaurants increased self-service kiosks. And yes, artificial intelligence is playing a role too.

says Eric Brinjolfson of Stanford. There's a whole wave of very powerful technologies that are just coming online, and they're beginning to have an effect in specific areas like call centers, software, where there's measurable productivity gains. The Bureau of Labor Statistics says productivity rose 3.3% in the second quarter of this year. But economist Gerald Cohen of the University of North Carolina says the big question is whether such robust gains can continue. He says they may have already slowed.

The data is saying maybe, but it's not clear because there's just been so much post-COVID challenges. Cohen says there's a lot of noise in the data. But it's tempting to hang on to hopes that productivity growth will remain robust because that would simplify the Fed's work. If we think we're in this higher era of productivity, that generally matches with an era of low, inflation or lower inflation. And if productivity does the job of cooling inflation, then the Fed can focus on supporting the labor market instead. I'm Nova Saffo for Marketplace. All that stuff we throw in the blue recycling can out by the garage or in the trash room of our apartment buildings. Only about 20% of the stuff that can be recycled actually does get recycled. That's according to the recycling

partnership, which is, to be clear, a recycling advocacy group. And there are a lot of reasons that that recycle rate is so low. One of them, though, is that it costs more to sort and process some of those materials than the market will pay for them on the other end. So, enter now artificial intelligence. Marketplace's Amy Scott went to have a look at technology that uses computer vision to more quickly and more cheaply extract value from the stuff that we throw away. In a hangar-like building in Louisville, Colorado, outside Denver,

I'm standing in front of a giant conveyor belt, eight feet wide and above my head. Standing on my tippy toes, I can see it strewn with crumpled plastic bottles and cans and other scraps. So that's our data, that's our fuel. But yes, that's garbage. You know what they say about one man's trash? Matanya Horowitz is founder and chief technology officer of AMP, a company that builds AI-powered recycling systems. And this is the test lab. It's going to be loud when he turns the system on.

So Horowitz explains what I'm about to see. First, the stream of garbage will pass under a pair of security cameras. It's looking at the material taking photos. A computer trained on millions of images of trash will identify different types of recyclable plastic and then send a message to sort it accordingly. What we do is we accelerate the material and then throw it off the end of a conveyor belt,

and it creates almost a garbage waterfall. And so behind the waterfall, we have a couple air jets, and the air jets just use a little puff of air to punch out the material. That's the warning sound, and then a few seconds later, the machine roars to life. Yep, here we go. As the stream of waste pours down from one conveyor belt to another below, the waterfall, some items get blown up into one of two compartments.

This is our double jet, so it's sorting two commodities at once. So number one plastics are gone on the bottom, number two plastics with your milk jugs up top. Kind of terrifying. Yeah, it's pretty strong. It can move like phone books and things like that. Scary to watch, but much safer and less tedious than sorting it by hand. Sorting jobs at recycling plants are notoriously hard to fill. Horowitz says this AI-driven system is also way faster. If you or me were to do this sorting ourselves, we would do about 40 picks a minute.

And honestly, after an hour or two, we'll get pretty tired. We probably won't be able to sustain that. These jet devices, they'll do thousands of picks a minute. And that means higher recovery. rates at a lower cost. For this demo, AMP's system was just sorting plastic from material sent for testing from its facility in Cleveland, but the technology can identify and divert pretty much anything from the waste stream. Amp has also developed a process to convert organic material that would otherwise rot in the landfill and produce methane into something called biochar.

Think food scraps and greasy pizza boxes. We put it through a process called pyrolysis. It's basically the process they use to make charcoal. The biocharch can be used to make concrete or added to soil in agriculture. And so this serves as a form of carbon sequestration. Amp recently announced a new 20-year contract in southeastern Virginia to process solid waste for eight communities with a guarantee to divert 50% of waste from the landfill. 30% in the form of organics and 20% in the form of recyclables.

That's Dennis Bagley, Executive Director of the Southeastern Public Service Authority in Chesapeake, Virginia. He says the region's landfill was on track to fill up by 2060 with no available options for a new site. This will extend its life by another 35 years and eliminate the need for separate curbside recycling. I have a philosophy that Americans are inherently lazy, and they don't recycle because it takes effort. What this does is takes that element out. So everybody becomes a recycler, whether you want to or not. Whether there's a market for all that recycled material is another challenge. So-called extended producer responsibility laws that several states have passed could help by shifting the cost of dealing with packaging after it's used to, producers and requiring minimum levels of recycled content. Colorado's program will help pay for a new recycling facility near Denver, opening next year,

using Amps AI technology. In Louisville, Colorado, I'm Amy Scott for Marketplace. More stories like that from Amy and the gang on our Climate Solutions podcast. It's called How We Survive. You can find a link on our webpage, obviously, or on the platform. of your choice. Just follow us there. This final note on the way out today, President Trump's favorite, if misguided economic indicator, the trade gap, technically called U.S. International Trading Goods and Services, came out today. This data is from, yes, September delayed. I know.

The difference between what we bought from overseas and what we sold abroad narrowed to the lowest it's been in five years. The caveat here, which careful followers of trade news should already know, is that the president's have done a number on the metrics of who is trading what with whom. Our daily production team includes Livy Burdette, Andy Corbin, Maria Hollenhorst, Sarah Leeson, Sean McHenry and Sophia Terenzio. Will Storrizzurie is the supervising senior producer. I'm Kai Risdahl. We will. See you tomorrow, everybody. This is APM.

Hey, everybody, it's Kai Risdahl, the host of Marketplace. It has been a year since the fires here in Los Angeles, and businesses that burned are still struggling. You know, I won't lie. I've looked. I've looked at, you know, hey, maybe maybe we move the store. It just, it wouldn't be the same hardware store. On the ground reporting and what the year ahead has in store for business owners still recovering, listen to Marketplace on your favorite podcast app.