While Federal Reserve Board Chairman Jerome Powell is busy trying to crash the economy and to cause a recession to satisfy the banksters of Wall Street who would like nothing better than high unemployment if it meant they can pay less interest on the borrowed money they live on, the top-line jobs creation number remained hot in February.
But the top-line jobs creation number is not all that it appears to be. Economist Paul Krugman explains that Jerome Powell is succeeding in slowing the jobs market with high interest rates.
As I see it, 4 recent indicators of labor market hotness: 1. JOLTS openings 2. quits 3. private openings 4. AHE. The last 3 all suggest substantial cooling https://t.co/6Y3i0XoW3j
— Paul Krugman (@paulkrugman) March 10, 2023
My view too. But with the caveat that we've been jerked around by data revisions so much that I take every report on AHE with a whole shaker of salt https://t.co/kbr6Ikjznb
— Paul Krugman (@paulkrugman) March 10, 2023
Job creation decelerated in February but was still stronger than expected despite Federal Reserve efforts to slow the economy and bring down inflation.
Nonfarm payrolls rose by 311,000 for the month, the Labor Department reported Friday. That was above the 225,000 Dow Jones estimate and a sign that the employment market is still hot.
The unemployment rate rose to 3.6%, above the expectation for 3.4%.
I would argue that this represents the “churn” in the labor market, people quitting jobs that they hate to look for other work they find more satisfying in a hot labor market. This has been a trend during the economic recovery from the Covid-19 pandemic.
There was some “good news” on the inflation side, as average hourly earnings rose 4.6% from a year ago, below the estimate for 4.8%. The monthly increase of 0.2% also was below the 0.4% estimate.
Wall Street bias in reporting here: slower wage growth is “good news.” It would take years of wage increases to make up for the decades of wage theft that benefitted Wall Street and the wealthy class. There are no signs of a wage-price inflation spiral as occurred in the 1970s. This is old economic thinking in a new economy.
Wage stagnation in the United States has been a problem since the early 1970s, but became more pronounced in 1979. Although wages have increased, they have not kept up with productivity gains, and real wages have barely risen after inflation is taken into account. This has had a significant impact on the middle class, leading to inequality, poverty, and division. The COVID-19 pandemic has led to wage gains across industries, but it is uncertain whether this is a new reality. Automation has been a major factor in wage stagnation, especially in manufacturing jobs.
NBC News continues:
Though the jobs number was stronger than expectations, February’s growth represented a deceleration from an unusually strong January. The year opened with a nonfarm payrolls gain of 504,000, a total that was revised down only slightly from the initially reported 517,000. December’s total also was taken down slightly, to 239,000, a decrease of 21,000 from the previous estimate.
Stocks were mixed following the release, while Treasury yields were mostly lower.
Leisure and hospitality led gains, with an increase of 105,000, about in line with the six-month average of 91,000. Retail saw a gain of 50,000, government added 46,000 and professional and business services saw an increase of 45,000.
Information-related jobs declined 25,000, while transportation and warehousing lost 22,000 jobs for the month.
The jobs report comes at a critical time for the U.S. economy, and consequently for Fed policymakers.
Over the past year, the central bank has raised its benchmark interest rate eight times, taking the federal funds rate to a range of 4.5%-4.75%.
As inflation data appeared to cool towards the end of 2022, markets expected the Fed in turn to slow down the pace of its rate hikes. That happened in February, when the Federal Open Market Committee approved a 0.25 percentage point increase and indicated that smaller hikes would be the case going forward.
However, Fed Chairman Jerome Powell this week told Congress that recent metrics show inflation is back on the rise, and if that continues to be the case, he expects rates to rise to a higher level than previously expected. Powell specifically noted the “extremely tight” labor market as a reason why rates are likely to continue rising and stay elevated.
He also indicated that the increases could be higher than the February hike.
Though Powell emphasized that no decision has been made for the March FOMC meeting, markets recoiled at his comments. Stocks sold off sharply, and a gulf between 2- and 10-year Treasury yields widened, a phenomenon known as an inverted yield curve that has preceded all post-World War II recessions.
The wealthy investor class is fleeing to the safety of U.S. Treasury bonds to preserve their wealth out of fear of the Federal Reserve Board’s attempt to cause a recession.