Damn! … The economy produced lots of jobs again
The latest Jobs Report showed the addition of 315,000 new jobs in August. At any other time that would be good news – not great, but pretty good. Of course, President Biden is taking a victory lap as if it is a really great report – and taking full credit.
But is it really good news?
Probably not – and that is because we do not live in normal times. We have a major inflation problem – and at the current rate, workers are losing one month of their income to inflation.
Recovering Old Jobs
Undoubtedly, Biden will again point to the fact that there has been a record number of jobs created during his year-and-a-half in office. What he will not say is that the record numbers are virtually all due to the anticipated return of jobs after the devastating Covid shutdown. In fact, after Biden’s one-and-a-half years in office, America has not yet reached the pre-Pandemic job levels. That will take a few more good job reports.
The second mitigating issue with the jobs report is that the good news is actually not-so-good news. To get the inflation under control, we need to INCREASE the unemployment rate in order to lower the amount of money in the market – reduce consumer spending. That is what Jerome Powell is doing at the Federal Reserve. He basically has only one tool to reduce employment and the money in circulation and that is to increase the interest rates – and that means increased unemployment. There was a slight uptick in unemployment from 3.5 to 3.7 percent. In this case that is good news – but not enough to make a difference. Probably not enough to impact on the inflation rate since the uptick was largely do to more folks re-entering the work force. That stay-at-homes are running out of money.
Higher Interest Rates
If we continue to create jobs at this rate, we can expect another BIG leap in the interest rates in the next month or so. And that would come on the heels of previous large increases. If the Fed goes too far, it will plunge America into a Recession – and technically it already has, albeit more of sticking our toes in the waters of recession rather than a full plunge.
Increases in the interest rates are not good for the consumers – and especially those in the lower tax brackets. It means higher mortgage rates for new buyers and those on variable interest mortgages. It will hit people through their credit cards – which already carry high interest rates and special charges.
Then there is the issue of who is going to take these new jobs. We have more job openings than at any time in history – even as more and more folks do not have jobs because they are not looking. We only need to create more jobs, but we need to have people taking them.
The simple fact is that America has more jobs than we have productive people. We still have too many consumers and not enough producers – but those consumers and even those non-producers have enough money to keep the fires of inflation burning brightly for now.
Incidentally, the drop in gas prices is good news, but gas is only one of many inflationary pressures. That is why we still see inflation at the grocery store. We are not yet winning the battle over inflation – and we are not yet out of danger of a recession.
Hurray for the job numbers … arrrrgh for what they mean.
So, there ‘tis.