The rise of jobs that just won’t quit

Still, the workforce remains smaller than it was before the pandemic devastated the economy, shrinking again in April with 363,000 people leaving the market. And job growth figures for February and March were revised down by a combined 39,000.

The stubbornly low percentage of Americans participating in the workforce: That figure is now 62.2 percent. it highlights how narrow the window is for the Federal Reserve, which has raised rates twice since March and will continue to do so for months with inflation at its highest level in four decades. The central bank needs to rein in inflation without pushing the US into recession and ending the jobs boom, a danger that would remove a crucial economic talking point for President Joe Biden and Democrats in the 2022 midterm elections. and beyond.

“Normally, we would see these kinds of job gains and see an unemployment rate where it is and say, ‘Yes! Normal days are here again!” said Beth Ann Bovino, chief US economist at Standard & Poor’s. “But these are not normal times and the Fed clearly has to catch up, and that could be at the expense of the economy. The shock won’t necessarily topple the apple cart in 2022, but my concern is for 2023 once these spikes really start to pile up.”

Austan Goolsbee, a University of Chicago professor and former top economic adviser to President Barack Obama, told CNBC on Friday that the jobs report is strong. But the backdrop of rising inflation, the end of congressional fiscal stimulus, and uncertainty around the world cast a shadow over things.

“It’s the Goldilocks report, but it’s Goldilocks in a horrible situation,” Goolsbee said.

Challenges from the Federal Reserve and possible turmoil in the global economy have rattled Wall Street, which also does not offer a good outlook for an administration trying to promote economic strength.

Markets rose on Wednesday after Fed Chairman Jerome Powell announced a half-point hike in the central bank’s key target rate, but said the central bank was not considering larger hikes at June and July meetings. . But investors thought twice on Thursday as weak earnings, especially in technology companies, and fears about Fed policy wiped out all of the previous day’s gains.

Rate hikes, the war in Ukraine, and companies’ problems with supply chains and labor shortages have left Wall Street subject to increasingly sharp swings and raised questions about the prospect of a “hard landing.” soft,” in which the Fed controls inflation without triggering a recession. The central bank itself has come under fire from critics who say it waited too long to tackle inflation.

“Markets are beginning to realize that the Fed is so far behind that there may be no ‘landing’ at all,” said Richard Bernstein, chief executive officer of Richard Bernstein Advisors and a former chief investment strategist at Merrill Lynch. “Either it’s going to be a hard landing because inflation is so persistent that they have to crush the economy to beat it. Or they can’t land it,” and inflation spirals out of control.

Treasuries are also suffering, with the benchmark 10-year bond yield rising above 3 percent this week for the first time since 2018, sending mortgage rates to their highest point in more than a decade. after the collapse of the real estate market.

Treasury Secretary Janet Yellen echoed other administration officials in expressing optimism.

“I feel very good about the strength of the US economy. The labor market is very strong,” Yellen said at a Wall Street Journal event on Wednesday, while acknowledging the risks. He said the Fed could still pull off a soft landing if the bank is “slick” and “lucky.”

But there is a lot of pessimism among Americans. A CNN poll this week showed the lowest level of confidence in the economy in a decade. The same poll showed that a majority of Americans believe Biden’s policies have hurt the economy. And 8 in 10 said the US government isn’t doing enough about inflation.

Friday’s jobs report, along with another Labor Department survey earlier this week that showed a record 11.55 million job openings, shows there is still good news in the economy. The Job Vacancies and Job Turnover Survey, or JOLTS, reported a record 4.54 million people who quit their jobs in March. A high rate of resignations generally means that workers feel confident that they can move on to another, higher-paying position with no problem.

And hourly wages have been gaining. They rose 0.3 percent in April, an annual rate of 5.5 percent, just below March’s 5.6 percent pace. The problem is that inflation rose around 8 percent during the same period, reducing the purchasing power of consumers. The tight labor market also complicates the Fed’s position, with supply failing to keep up with demand, opening up the possibility of a wage-price spiral that the central bank would desperately like to avoid.

As Powell said on Wednesday, the Fed’s power is on the demand side of the economy. It raises rates to reduce economic activity and relieve upward pressure on prices. But it doesn’t have any real tools to help with persistent supply chain disruptions or deeper structural issues that keep people from joining the available labor pool.

But not everyone is giving up hope that the Fed can hit the brakes deftly enough to push prices down, but not crash the economy and end the long run of strong job gains.

“Markets liked that Powell said financial stability was important and they weren’t going to derail things with extreme moves,” said David Kotok, chief investment officer and co-founder of Cumberland Advisors. “What the markets don’t like is the current global situation, which is pretty ugly with uncertainty about the virus in China, a gunfight in Europe, a crushing of both supply and demand in the US. .and the impossibility of having confidence in earnings. numbers for the next year or more.”

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