SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
U.S. Federal Reserve Bank Board Chairman Jerome Powell answers reporters' questions during a news conference in Washington, D.C. on November 2, 2022.
(Photo: Chip Somodevilla/Getty Images)
Friday's Surprisingly Positive Jobs Report Does Not Mean Fed Should Keep Raising Rates
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.
Feb 04, 2023
Surprising most analysts and forecasters, employers added a whopping 517,000 jobs in January, according to Friday 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 Friday’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.
An Urgent Message From Our Co-Founder
Dear Common Dreams reader, It’s been nearly 30 years since I co-founded Common Dreams with my late wife, Lina Newhouser. We had the radical notion that journalism should serve the public good, not corporate profits. It was clear to us from the outset what it would take to build such a project. No paid advertisements. No corporate sponsors. No millionaire publisher telling us what to think or do. Many people said we wouldn't last a year, but we proved those doubters wrong. Together with a tremendous team of journalists and dedicated staff, we built an independent media outlet free from the constraints of profits and corporate control. Our mission has always been simple: To inform. To inspire. To ignite change for the common good. Building Common Dreams was not easy. Our survival was never guaranteed. When you take on the most powerful forces—Wall Street greed, fossil fuel industry destruction, Big Tech lobbyists, and uber-rich oligarchs who have spent billions upon billions rigging the economy and democracy in their favor—the only bulwark you have is supporters who believe in your work. But here’s the urgent message from me today. It's never been this bad out there. And it's never been this hard to keep us going. At the very moment Common Dreams is most needed, the threats we face are intensifying. We need your support now more than ever. We don't accept corporate advertising and never will. We don't have a paywall because we don't think people should be blocked from critical news based on their ability to pay. Everything we do is funded by the donations of readers like you. When everyone does the little they can afford, we are strong. But if that support retreats or dries up, so do we. Will you donate now to make sure Common Dreams not only survives but thrives? —Craig Brown, Co-founder |
© 2021 robertreich.substack.com
Robert Reich
Robert Reich is professor emeritus of public policy at Berkeley and former US secretary of labor. His latest book is the No. 1 New York Times best-seller, "Coming Up Short."
Surprising most analysts and forecasters, employers added a whopping 517,000 jobs in January, according to Friday 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 Friday’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.
From Your Site Articles
- 'People Will Lose Their Jobs': Expert Chorus Against Fed Rate Hikes Grows ›
- 'Bad News for Workers' as Wage Growth Slows Amid Fed Rate Hike Barrage ›
Related Articles Around the Web
Robert Reich
Robert Reich is professor emeritus of public policy at Berkeley and former US secretary of labor. His latest book is the No. 1 New York Times best-seller, "Coming Up Short."
Surprising most analysts and forecasters, employers added a whopping 517,000 jobs in January, according to Friday 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 Friday’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.
From Your Site Articles
- 'People Will Lose Their Jobs': Expert Chorus Against Fed Rate Hikes Grows ›
- 'Bad News for Workers' as Wage Growth Slows Amid Fed Rate Hike Barrage ›
Related Articles Around the Web
We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.