Job market impact from immigration policy 'doesn't make any sense,' says Treasury's Joseph Lavorgna

Speakers

Joseph Lavorgna — Former Chief Economist, National Economic Council

Summary

GDP has been growing at approximately 4%, driven primarily by the goods sector rather than services.
Real goods output is running at an annualized rate of over 9%, the fastest pace in over a decade, signaling a "real boom" in the industrial economy.
Manufacturing and construction sectors are reversing previous declines, with temporary employment (a leading indicator) turning positive for three consecutive months.
Dismisses the narrative that immigration restrictions are stifling the labor market; argues instead that labor participation is rising and American wages are seeing "huge gains."

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
INDUSTRIALS /US RESIDENTIAL CONSTRUCTION SECTOR	LONG	Joseph Lavorgna Former Chief Economist, National Economic Council	"Real goods output is running over 9% annualized rate, which is a real, boom... You mentioned construction. Very good. You mentioned manufacturing up." Lavorgna argues that the economy is undergoing a structural shift led by the "goods sector" rather than services. With goods output growing at 9% and temporary hiring (a leading indicator for manufacturing) turning positive, capital is likely to rotate into industrial and construction stocks which are the direct beneficiaries of this "boom." Long Industrials and Homebuilders to capture the outperformance in the goods-producing economy. If the labor supply constraints mentioned by the host (due to immigration policy) eventually choke off growth, or if the manufacturing data is revised downward like previous jobs reports.	—
US CONSUMER /ECONOMY	LONG	Joseph Lavorgna Former Chief Economist, National Economic Council	"You're going to see American wages rise, the index of aggregate weekly payrolls is [up]... That's a huge gain." Lavorgna explicitly refutes the bearish labor thesis. He connects rising labor participation and increasing aggregate payrolls to a strengthening economy. Higher wages and more people entering the workforce directly translate to increased disposable income and consumer spending power. Long US Consumer / Economy exposure based on the strength of the labor market and wage growth. Wage-push inflation could force the Fed to keep rates higher for longer, compressing equity valuations.	0:24