The Fed is playing catchup, thanks to the ever-changing economy and pandemic.
That they’re in the role of the proverbial tortoise, in an existential race versus hare-raising inflation and stubbornly persistent unemployment, is a no-brainer.
The only question is, will the world’s largest and most advanced central bank recover to overtake events of great consequence — or will those economic trials and tribulations force a reckoning, namely:
Is the Federal Reserve still relevant?
The surprising pace of recent job growth may be catching recent headlines. But, as Neil Irwin points out, other details contain the biggest implications for markets in the months ahead; namely, wage growth.
Neil Irwin reminded us yesterday morning that a lot of hopes are riding on inflation easing this year. But it hasn’t happened yet—or over the last year.
Consumer prices surged more than expected over the past 12 months, suggesting a bleak outlook for inflation and increasing the likelihood of more than a few interest rate hikes this year.
The CPI (all urban index) rose 7.5% in January over a year ago, the Labor Department reported yesterday—the highest since February 1982. Economists were expecting an increase of 7.2%.
The so-called core CPI, which excludes volatile food and energy prices, increased 6%, compared with the estimate of 5.9%—its highest since August 1982.
Wow, talk about exceeding expectations
Job growth was up much higher than pundits expected in June, as reported today by the government.
According to the Bureau of Labor Statistics, nonfarm payrolls increased by 372,000 over the month, way stronger than economists’ consensus estimate of 250,000.
The BLS’ U-6 unemployment rate that includes discouraged workers and those holding part-time jobs for economic reasons dropped to 6.7% from 7.1% (the underreported U-3 headline rate remained unchanged at 3.6%).
Civilian labor force participation was essentially flat, falling slightly to 62.2% from 62.3% but still remains more than a full percentage point below the level seen just before the pandemic started in 2020.
Total civilian employment – at 158.1 million – actually fell somewhat in June and was still close to 800,000 below its February 2020 level.
Average hourly earnings increased 0.3% for the month and were up 5.1% from a year ago, indicating that wage pressures remain strong as brisk inflation sails along.
Among the unemployed, both the number of permanent job losers (1.3 million) and the number of persons on temporary layoff (827,000) changed little over the month.
The number of long-term unemployed – i.e., those jobless for 27 weeks or more – was essentially unchanged at 1.3 million. This measure is 215,000 higher than in February 2020.
The long-term unemployed accounted for 22.6% of all unemployed persons in June.
Interestingly, 7.1% of employed Americans teleworked (worked mainly from home) because of the pandemic, down from 7.4%.
Another 2.1 million people reported that they’d been unable to work because their employer closed or they were laid off thanks to the pandemic – up from 1.8 million in May.
By sector, education and health services led the job added, with 96,000 hires, while professional and business services added 74,000 positions.
What do these numbers mean?