“Who’s creating U.S. jobs?” asks the Christian Science Monitor.  In this era of multi-decade highs in unemployment, it’s a valid question.  The answer, which will surprise many, is Mexican immigrants.

The immigration debate turned downright nasty in the final years of the housing boom.  There was an enormous public backlash against what was viewed by many as an excessively lax immigration policy that rewarded those who came illegally.  The housing bust and the rapid evaporation of construction-related jobs caused a significant reversal in migration flows and public anger found new targets.  But the perception remained that immigrants were a major negative for the U.S. job market and that immigrants “took” American jobs.

This is not an argument I’d like to revisit at the moment.  Instead, I’d like to give the Christian Science Monitor’s account of the recent surge in entrepreneurial visas given to affluent Mexicans fleeing drug violence and extortion to start businesses in the United States.  The Monitor writes,

As Mexico’s drug wars escalate, businessmen and families have become a natural target for traffickers looking to extortion to finance their operations, says Art Martinez de Vara, a San Antonio-based immigration lawyer. Some 17,000 people have been killed in drug violence since President Felipe Calderón took office in December 2006 and vowed to take on the drug traffickers.

In fiscal year 2008, the US issued E-1 and E-2 visas to 1901 Mexicans and their families, nearly three times the level of a decade before.

The natural target for Mexican immigrant investors? San Antonio.

“San Antonio just came out … as probably one of the best cities to invest in,” says Alfredo Lozano, an immigration attorney who works in the same law firm as Mr. Martinez. It’s close to Mexico but considered less dangerous than cities like Brownsville and Laredo.

From “Who’s Creating US Jobs? Mexicans.“

Mexico’s loss is America’s gain.   These are not uneducated migrant laborers.  These are ambitious entrepreneurs with money to invest and workers to hire, and there are doing it here instead of there.

A few new small  businesses in South Texas are a drop in the bucket when we have 10% unemployment, of course.  But in a period of economic gloom, it is nice to get a little good news now and then.

Charles Sizemore, CFA

For most of the post-WWII era, there was a distinct demographic trend in force: fleeing urban crime and decay, middle class and affluent families moved further and further into the suburban hinterlands in search of white picket fences and neighborhood homeowners associations.  The old urban cores were left to rot.

Interestingly, this trend appears to be in at least partial reverse.  The housing bubble and bust left behind the kind of blight in the suburbs — empty homes and boarded-up storefronts — that  Americans were accustomed to seeing in inner cities. Meanwhile, major urban renewal efforts are underway in several large American cities.  I’ve witnessed it myself in my hometown of Dallas, Texas.  Not too long ago, large swaths of the Uptown neighborhood were a no-mans land of streetwalkers and dope pushers.  Now, it’s a highly sought-after neighborhood filled with $500,000 townhomes.

As prices rise in the cities, lower income Americans are being pushed out into the suburbs, where the largest percentage of the American poor live.  But since most suburbs are car-centered bedroom communities, they lack the infrastructure to deal with their needs.  The Christian Science Monitor writes,

Because the suburbs have not been accustomed to helping the poor, they lack the services to cope with issues such as homelessness. Emergency and social services, for instance, are traditionally concentrated in urban centers…

Suburban communities may also lack social coping mechanisms. Residents worried about property values or safety have in the past resisted the establishment of homeless shelters in neighborhood church basements or community centers. But…the recession is making residents more compassionate.

Full article: “Poverty’s New Face: Suburbs“

Suburbs are also generally absent of public transportation, or transportation is limited to a small number of infrequent and inconvenient buses.  Attempting to get around the suburban fringes of Dallas, Houston, Atlanta, Miami, or any other major sunbelt city using public transit would be time-prohibitive.  If you can’t afford a car, don’t plan on leaving your house in these cities.

It remains unclear whether the demographic convection current will continue or if it is merely an aberration caused by the housing bubble and bust.   In the meantime, America’s suburban mayors and city councilmen are looking for ways to accommodate the newly poor among them.

The New York Times recently reaffirmed what U.S. government data and anecdotal evidence has been telling us for several months:  immigration to the United States is falling fast.  (See “Mexico Data Say Migration to U.S. Has Plummeted“)

New Mexican government data support U.S. reports. The Times writes, “Census data from the Mexican government indicate an extraordinary decline in the number of Mexican immigrants going to the United States.”

Migration out of Mexico fell by more than 25% in the 12-month period ended August 2008, and it is highly likely that the decline will prove to be even steeper in the months that followed.   Though stronger border enforcement explains some amount of the decline, the Times is well aware of the primary reason: “the current decline…is largely a result of Mexicans’ deciding to delay illegal crossings because of the lack of jobs in the ailing American economy.”

We are truly in a brave new world.  Mexican immigration to the United States has been a defining element of the fast-paced, globalized American economy of the 1990s and 2000s.   It provided cheap labor to American homes and businesses, and it also provided a “pressure release” for Mexico’s economy, which has historically had a difficult time providing enough jobs for its workers.  

With demand for immigrant labor declining in the U.S., Mexico will have more surplus workers than ever, which could significantly decrease wages in that country and also lead to higher unemployment.  Will this eventually inspire more Mexican nationals to risk illegal entry into the United States?  For the would-be immigrant, it becomes an unfortunate calculus:  which situation is less bad, competing for a job in an increasingly hostile United States or suffering through potentially even more difficult times at home?  

On the other hand, the sudden surge of home-grown workers could provide a boom to the Mexican economy, as that country will have the use of many of its most talented workers for the first time in decades.  Rather than build the American economy, might they build their own?

There are no obvious answers here.  Over the longer term, Mexico should benefit from keeping its more ambitious citizens in Mexico.  But there will likely be several years of painful adjustment as they are absorbed into the economy.     

As we wrote last week in “The Assault on Free Trade Continues,” we continue to see signs of increasing protectionism and economic nationalism.  There is nothing new under the sun.  We saw the same thing happen during the Great Depression (making it considerably “greater” for many formerly prosperous countries) and we saw a lesser version in the wake of the deep recession of the 1990s when the Nafta agreement was being crafted. 

Of course, anti-free-trade sentiment goes back much further.  The Industrial Revolution in Britain was almost killed in its infancy by the protectionist Corn Laws, which were designed to protect the landed agricultural interests.  Had the free traders not won the debate in Parliament, the world might have taken a very different path.

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As a very positive sign for the future, the New York Times reports that “More babies were born in the United States in 2007 than in any other year in American history.” (“’07 U.S. Births Break Baby Boom Record”)

The National Center for Health Statistics recorded 4,317,000 births in 2007, slightly higher that the previous high figure for 1957—at the absolute peak of the baby boom.   Interestingly, the Times continues, “…in contrast with the culturally transforming postwar boom, when a smaller population of women bore an average of three or four children, the recent increase mainly reflects a larger population of women of childbearing age.” 

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