Are illegal aliens an economic indicator? ASU Economist Dawn McLaren says they are. She says when apprehensions of illegal immigrants are down, that indicates a suffering economy. McLaren will talk about the issue and the Arizona economy.
>>Ted Simons:
There are leading economic indicators that help tell economist that a downturn is coming. Dawn McLaren says one of those indicators is from a most unlikely source -- illegal immigrants. McLaren says fewer apprehensions along the border a few months ago pointed to a slowing economy now. Here to talk about that, and the economy in general, is ASU W.P. Carey School of Business Research Economist Dawn McLaren. Dawn, good to have you on "Horizon", thanks for joining us.
>>Dawn McLaren:
Thank you. It's nice to be here.
>>Ted Simons:
So illegal aliens are an economic indicator. Do tell.
>>Dawn McLaren:
Isn't that nice? What's nice about Illegal Immigrants, no matter how you feel about it, the political spectrum, it's nice for economists because they're reacting to Labor Market conditions. They're coming across when there are jobs for them to have over here, when the economic conditions are ripe for them to do so, not when the State Department or the USCIS says, "we finally have your paperwork ready, come now". That's why I look at illegal immigrants versus legal immigrants. I look at the apprehensions on the border because even if people are coming across more than one time, which they generally do try a few times, it shows an intensity of trying to get across, and how many people are coming across.
>>Ted Simons: How much does security efforts, do these efforts, I should say, along the border factor into your data?
>>Dawn McLaren:
Well, there is some difference from time to time. For instance, it may take now three times, instead of two times to get across. So you may see one person getting apprehended more than one time. But in general, once you've got it seasonally adjusted, once you've adjusted for the things we need to look at, it works quite well. And what happened was, on a seasonally adjusted basis, I saw apprehensions in, oh, January 2006, December 2005. They hit a peak, and they started to hit downwards, down, down, down. And I said, well, looking at what happened previously in this, about a year later, we could expect to see a peak and a starting of a downturn in the US economy. And sure enough, about a year later is when we hit that peak in our housing market, and all of that started to fall apart, and we got worse and worse and worse when it came to that.
>>Ted Simons:
So, a leading indicator, as opposed to a lagging indicator. And again, when you look at things like Border Security, you look at things like the Employer Sanctions Law here in Arizona, you look at the overall climate, the political climate in America.
>>Dawn McLaren:
It's the economy. It really -- it comes down to the people, the wage differential is so high that no matter how much you put more Border Security, no matter how many of these other things you put there, that differential is so big, because think about the Minimum Wage in Mexico. $5 a day, and a day is not necessarily eight hours long. Then you look at our wage here, where you could be earning $10 an hour. Never mind $5 a long, hard day, but $10 an hour. To reach that differential, our Border Security would have to be so difficult that it would take away that economic incentive to come across. So as long as the economy is running OK, now, when you look at things like the Employer Sanctions Law, that's a State thing, and not a nationwide thing. So that's a different issue. That means people would come across, but they may not necessarily stay in Arizona.
>>Ted Simons:
So, crackdowns and these sorts of things don't necessarily matter, A: if the economy goes south, and they're not going to necessarily matter if the economy speeds back up again?
>>Dawn McLaren:
Right. Exactly.
>>Ted Simons:
OK. I gotta ask you, what are you seeing right now, as far as your research regarding apprehensions?
>>Dawn McLaren:
Well, this is the problem. I have been looking at a lot of leading indicators. You can't just take one on its own.
>>Ted Simons:
What else do you look at? Real quickly, what else do you look at?
>>Dawn McLaren:
We have a consensus forecast that we do, we have our Arizona Business Conditions Index, an index I put together each month. And that's still showing we're in a recession territory for Arizona specifically, not even just the country, but Arizona specifically. So we look at a number of different ones. None of them, unfortunately, have done a turn around. None of them looked like they have bottomed out and starting to come back up. I'm really hoping that they start to do that soon.
>>Ted Simons:
And I was gonna say. You are putting folks in a difficult position of saying, "Gee, I can't wait for more apprehension and more folks coming over here undocumented because that means the economy is back up and going".
>>Dawn McLaren:
[Chuckles] See, if our economy is running well, yes, it's an attraction for people to come here. And like I said, with illegal immigrants, they are reacting to the Labor Market and Labor Market conditions here are well connected. They're also very easily hired and fired. You don't have to worry about where they're going to go if you need to let them go, because they're not like an American citizen, or someone who is here legally who might need to collect benefits, and those types of things. They'll just go.
>>Ted Simons:
So again, I just wonder, though, if there can be a question here regarding what seems to be a moving target, in terms of verifying that a worker is here legally, the climate in Arizona, the climate across the country in general. I just wonder how accurate and how much you can pinpoint something like that.
>>Dawn McLaren:
Well, see, remember, this is a big country. So when we look at the averages across the country, it's very different from looking at one particular state. One of the things we do in the unit that I work for is the job growth update. We do blue chip job growth updates. Every month we're looking at the rankings of the States. And Arizona used to rank really really well. We were in the top -- we were number one, we were number two, in the top five until very recently. In February, we ranked 42. So there can be better or worse climates for doing business. And the Arizona climate right now is not as good as perhaps it is, for instance, in Texas, which is in the top -- I think it ranks second in February.
>>Ted Simons:
Hmm. Before we let you go, I gotta ask you, in terms of the nation's overall economy, are we in a recession?
>>Dawn McLaren:
OK, now we have to say, "define a recession". For some people, we might say no, we're not in a recession because we haven't yet seen two quarters of declining GDP, and this type of thing. When we look at Arizona, we're pretty close. When we look at just the Arizona economy, we say, well, we do it by job growth. What does our job growth look like? For Arizona, it was 0.1 for February. So we're not doing -- we're very, very close. As soon as that drops off into the negative, we can say yes. This is what we could technically call a recession on a statewide basis. As for GDP going that way, well, we'll have to see what happens, but again, things don't look very good for the nation as a whole, but it is averages, and some places are doing quite well.
>>Ted Simons:
Alright. Well, it's an interesting Leading Economic Indicator, something we will all watch. Thank you so much for joining us. We appreciate it.
>>Dawn McLaren:
Thank you.
Dawn McLaren:Economist, W.P. Carey School of Business Research, Arizona State University;
