Today’s jobs report may spook the Fed (but it shouldn’t)
Friends,
Surprising most analysts and forecasters, employers added a whopping 517,000 jobs in January, according to this morning’s monthly labor report from the Bureau of Labor Statistics. This was almost twice the growth from December’s 260,000 jobs. The unemployment rate fell to 3.4 percent, the lowest since 1969.
What does this mean?
It may mean very little. The Bureau of Labor Statistics’s monthly report can bounce around a lot, depending on seasonal weights and samples. Next month’s job number could be far lower.
Also, keep your eye on wage growth. Average hourly earnings climbed in January at a slower pace than in December — by an annualized 4.4 percent, down from 4.8 percent in December. With prices still rising faster than wages, most workers continue to suffer declining real wage – that is, declining purchasing power.
But the strength of the labor market is likely to worry the Fed, which last Wednesday raised interest rates for the eighth time in a year – although only by a quarter of a percentage point this time.
“The labor market continues to be out of balance,” Jerome Powell, the Fed chair, said earlier this week. He stressed that we won’t have a return to his target 2 percent inflation in the service sector “without a better balance in the labor market,” adding “I don’t know what that will require in terms of increased unemployment.”
As I’ve said many times over the past year, this worry is misplaced. Most of the upward pressure on prices domestically is coming from big corporations with the market power to raise prices faster than their costs are rising. Much of the rest is coming from continuing supply shocks abroad, including Putin’s war’s effects on global energy and food prices, and China’s lockdowns followed by COVID.
And, as today’s report shows, wage gains are slowing and they lag behind price increases.
The basic reality is American workers don’t have the power to raise their wages. Big American corporations have the power to raise their prices. The Fed should not be aiming to increase unemployment as a means of slowing prices.
Tax The Rich.
In any other time or place, this jobs report would be seen as incredible, hopeful. However, at the head of the Fed, we have a Republican who has been drinking the Kool-Ade (sorry about the reference, but it feels like it is the right one) that workers are expendable and it is only corporations and what they take in that counts. Powell claims it is workers demanding reasonable wages that caused the inflation we are now experiencing. He has in his mind a magical figure of 2% inflation as his goal. He can't possibly know what it would mean to workers and their families to get that rate so quickly after a massive pandemic that killed millions around the world and well over a million in this country, that closed down China for many months, and brought out the strongest corporate greed in generations. I don't know where he got his economics training, but it did not include taking into account all factors when making a decision. Tunnel vision works well for corporations because they can tell that Powel and his crew are going to do little or nothing to stop them and besides, they have accumulated so much profit and bought back so much stock they will be sitting pretty as they say for a long time no matter what happens. And, the workers are interchangeable, aren't they? If unemployment goes up, they will have their pick of workers who will be forced to do whatever they are told at whatever wage the corporation chooses to pay, right? One can't help but wonder if that is just what Powell and his Republican buddies are hoping for.