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Jobs Report good (bad) news

Jobs Report good (bad) news

We have now seen the last Jobs Report before Election Day.  Its impact on the election – good or bad – is diminished by the fact that more than 30 million folks have already voted under the far too early early voting laws.

As an overview, the report shows that the U.S. economy is still growing (still recovering from the Covid shutdown) — although at a slower rate.  The 261,000 new jobs represent a modest gain.  Wage growth is slowing down – falling further behind inflation.  In the last year, workers have lost approximately eight percent or the equivalent of one month of their annual salaries.  The unemployment rate inched up by two-tenths of a percent to 3.7 percent.

It is the first sign that the Federal Reserve’s unprecedented series of interest rate increases may be starting to have an impact – slowing the economy down.  It may still be a policy of too late, but there can be no doubt that the Fed is now serious about tamping down the inflationary pressures caused by too much money chasing too few goods and services.

Decreasing inflationary pressures can be viewed as good news.  It is a cure, however, with rather bad side effects for the American people.  The Fed will have to keep increasing those interest rates until there is a significant increase in unemployment and a reduction in the ability of folks back home to continue spending so much money.  That means taking money – your money — out of the economy by diminishing the ability of the public to spend.

And that is one of the problems.  So much money has been – and is being – pushed into the economy that Americans have demonstrated an ability to continue spending despite all those past rate increases.

The Fed’s policy will not work until the interest rates and the unemployment levels prevent – in real terms – the ability of the public to spend.  As long as there is sufficient disposable income, the public will be disposing of it at a rapid rate.  One reason is that the anticipation of inflationary higher prices in the future has folks buying more than necessary today.  (Example: This week, I spent approximately $45 on items I would not usually have purchased at this time solely because of anticipated price increases in the future.)

The good news is that the latest Jobs Report shows the Fed’s interest rate hikes are having an effect – albeit very modest. That means more interest rate increases in December – probably another 75 basis points.  This series of large interest rate hikes is due to the Fed being too slow to impose more modest increases much earlier.

The really bad news in all this is that if you studied the Jobs Report closely, you would discover that Fed Chairman Jerome Powell said that a recession is likely.  It could be mild – or not – but he sees it almost as an inevitability.

Interestingly, former Fed Chairman Janet Yellen – now Secretary of the Treasury — does not believe there will be a recession.  Is that because she is no longer the Fed chairman but rather an official in the Biden administration – which has been peddling a dubious “good news” economic gospel for political reasons?

The irony of the Fed policy of interest rate hikes is that they are resulting in even higher costs for consumers.  In a sense, the only tool the Fed has to fight inflation is causing inflationary-like cost increases.  It is also hurting the stock market and all those stock-based retirement plans.

And as the Fed is fighting inflation, the Biden administration is fueling it with unbridled spending.  As the Fed tries to reduce the number of dollars chasing limited supplies, Biden & Co. are pumping more and more money into the economy.  The writing off of billions of dollars in student debt is just the latest example of economic malpractice.

The administration has authorized a larger than usual increase in Social Security to partially offset the impact of inflation on retirees.  Good as that is for seniors, it does put more money in the already overheated economy when less money is needed.  Providing money to “keep up with inflation” only creates more inflation.

Based on political self-interest, we hear a lot of b*** s*** from the politicians in Washington.  However, the inflation will go on well into 2023 and it will only subside when the recession hits.  There may even be a period of stagflation – high prices and low growth.  You can go to the bank on that – if you have any reason to go to the bank.

So, there ‘tis.

About The Author

Larry Horist

So,there‘tis… The opinions, perspectives and analyses of Larry HoristLarry Horist is a businessman, conservative writer and political strategist with an extensive background in economics and public policy. Clients of his consulting firm have included such conservative icons as Steve Forbes and Milton Friedman. He has served as a consultant to the Nixon White House and travelled the country as a spokesman for President Reagan’s economic reforms. He has testified as an expert witness before numerous legislative bodies, including the U. S. Congress. Horist has lectured and taught courses at numerous colleges and universities, including Harvard, Northwestern, DePaul universities, Hope College and his alma mater, Knox College. He has been a guest on hundreds of public affairs talk shows, and hosted his own program, “Chicago In Sight,” on WIND radio. Horist was a one-time candidate for mayor of Chicago and served as Executive Director of the City Club of Chicago, where he led a successful two-year campaign to save the historic Chicago Theatre from the wrecking ball. An award-winning debater, his insightful and sometimes controversial commentaries appear frequently on the editorial pages of newspapers across the nation. He is praised by readers for his style, substance and sense of humor. According to one reader, Horist is the “new Charles Krauthammer.” He is actively semi-retired in Boca Raton, Florida where he devotes his time to writing. So, there ‘tis is Horist’s signature sign off.

2 Comments

  1. Tom

    Yes I heard an interesting fact the other day that they want unemployment to go up because that indicates inflation is going down. I wonder if anyone thinks about those folks losing their job! As far as Janet Yellen, I thought she was a sharp economist type but she sure was asleep at wheel when it comes to inflation and the overheated economy. Wow, a total miss. Well I guess now she can snooze with Joe. Larry, as far as I know, no money has been given out to forgive student loans yet, and it looks like the program may be determined to be unconstitutional $the separation of powers clause. I think everything on student debt relief is on hold, right? Also I read today that the Fed is no longer taking applications until the court challenges are resolved, did you hear this too? I was surprised at the SS increase but this is not due to Biden, as SS increases are due to cost of living indexes and measures that determine the increase. As an Independent/Unaffiliated, I view both parties as having a hand in this whole inflation debacle. I got two checks from Trump that I did not need, and I do recall you writing about these checks which our beloved narcissistic POTUS sent to us with a letter ensuring we knew it was all because of him, not Congress. Actually he wanted to send us $2000 checks but the Democrats nixed this, good for them! And then I feel Biden owns much of it with another check, rent payment forgiveness or at least paying your rent put on hold which was very unfair to landlords, many of whom are people like us, Build Back Better funding, and of course the Inflation Reduction Act which appears to be acting in the opposite direction. Much of the senior population, at least 48% live at or below 1.25 times Federal Poverty Level (FPL) which is $18,310 for a senior couple and I think around $15,300 for a single person. These people are struggling the most and therefore the SS increase was needed for them – and I do not think it will cause as much harm as all of the aforementioned Biden efforts in this response. I am not sure how the prescription drug lower costs cap of $2100 will affect the economy but it will put more money in the hands of anyone on medications. By the way, I tipped a beer to you yesterday as I promised I would. But even that is up in cost now and I buy only the cheapest of beers! But isn’t it the thought that counts!

    Reply
    • Tom

      Sorry, I was in error on a single person FPL. The 2022 FPL for a single person is $13,590 and there are currently around 6 million 65+ living at this level which is about 10 – 11 percent of that population. Overall, Social Security: In 2022, 21 percent of the budget, or $1.2 trillion, will be paid for Social Security, which will provide monthly retirement benefits averaging $1,538 to 49 million retired workers. The hidden slight of hand here is that $1,538 X 49 million is only 75,362,000,000. The rest is lots of other stuff like unemployment benefits, CHIPS, Medicare and Medicaid, Disability benefits, etc. And lets not forget that Medicaid is the single largest payor (about 70%) of long term care beds for the elderly in skilled facilities. Obama proposed solving this but GOP shot it down because his figures showed sustainability for 69 years whereas GOP wanted 75 years, so the GOP voted all of it down. So we take care of a lot of people for that $1.2 T.

      An unmentioned part of inflation is our military industrial institution welfare program that needs more and more funding yearly. We seem to point out SS increases but never seem to point out defense budget increases, 3.9% in 2022 and almost a whopping 10% increase for 2023 where we are heading for a $1 Trillion defense budget by 2027! GOP loves defense budgets. This pumps a tremendous amount of money into the economy every year.

      Maybe the solution to both of these is in the next war, lets go back to more simple cannons and shoot seniors at the enemy!

      Reply

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