Job Market Defies the Fed

 Popular Economics Weekly

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All eyes are now on the Federal Reserve and Chairman Powell. Companies are daring Powell and his Governors to crimp their profits by threatening dire consequences (i.e., a recession) if they don’t slow down hiring at the current pace.

But corporations are not listening as the demand for workers far exceeds the aupply, so that 223,000 new nonfarm payroll jobs were created in December, per the US Bureau of Labor Statistics. This is still above the so-called replacement rate of jobs created to accommodate new job seekers.

And the unemployment rate dropped back to 3.5 percent, signaling that the 10.5 million job vacancies just reported in November was no fluke. But wages aren’t rising as fast, probably because most of the hiring is now in the lower paying service industries, with 145,000 jobs added just in Education/Health and Leisure/Hospitality.

The 28,000 added jobs in construction is probably because construction is beginning that is funded by the $1.2 trillion Infrastructure Investment and Jobs Act.

The Whitehouse says it includes a five-year allocation of $550 billion in federal investments in America’s infrastructure to upgrade highways and major roads, bridges, airports, ports, and water systems. Additional investments cover expansions and improvements to the nation’s broadband access, public transportation systems, and energy grid infrastructure.

Will US economic growth fall off a cliff in January? Maybe not, as I said in my last blog. The Atlanta Federal Reserves’ GDPNow estimate has just raised their estimate of fourth quarter GDP growth to 3.7 percent and it was right on predicting higher Q3 growth.

And at least one Fed Governor is sounding more dovish on inflatiion, reports MarketWatch. James Bullard, president of the St. Louis Federal Reserve, said on Thursday, the odds of so-called soft landing have gone up in part because of the sturdy labor market.

The Fed may find some solace in the declining job numbers. Hiring in November and October was much higher after being revised. The economy added 256,000 jobs in November and 263,000 in October.

So we need a few more dovish Governors on the Federal Reserve Board to agree with Bullard, and maybe persuade Chairman Powell to soften his inflation rhetoric.

Harlan Green © 2023

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