Opinion: The latest US jobs report is not what it seems

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We recently saw the release of the US jobs report for August, where 315,000 jobs were added. These 315,000 jobs became the main talking point, as you can see from the report’s celebration through the articles. It was a major political week when the report was released, with several campaign events taking place across the country, and incumbent politicians were happy to further bolster the report’s robustness. This is nothing unique to them; all administrations use the progress report to praise what they have achieved or at the beginning of their term to scold the previous administration for the situation they are in now. The problem, however, is that noise and congratulations became the comment of the week and overshadowed the details of the report; these details paint a more worrisome view of the economy.

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To many, 315,000 jobs sounds good, but reviewing the report first shows that full-time employment is down. People holding multiple jobs increased by 114,000, while 225,000 people worked part-time because they couldn’t find full-time work. This reads as if people who needed income had to get multiple jobs or a part-time job to make ends meet. If you were working multiple jobs to pay bills because you lost your full-time job, you probably wouldn’t feel any better about your financial situation than you did last month. However, the public is told that these numbers are a great success. These elements of the report suggest that people are working as hard as possible to make ends meet.

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The craziest thing about the response to the report is that most news networks also mentioned it positively, mentioning that it gave the Fed the green light for another rate hike at the next meeting. We just saw that increase on September 21st., when the Federal Reserve raised benchmark interest rates by 75 basis points. Another big rate hike won’t help people who are struggling based on August data. As the cost of auto loans and mortgages rises, we shouldn’t be surprised to see even more part-time jobs in the next report.

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So why did the Federal Reserve take this opportunity to raise rates again? It is to avoid structural inflation. The concern is that inflation will take root in the economy and create a spiral of wages and prices. Preventing this from happening is a critical part of how the Fed measures success. “We cannot allow a wage-price spiral to occur, and we cannot allow inflation expectations to become unanchored,” Federal Reserve Chairman Jerome Powell said earlier this year. Specifically, the wage spiral is where the cost of living gets so high that workers demand much higher wages, and then corporations need to charge more to keep making money, and so on and so forth until the economy stops working. efficiently. It sounds super scary and it’s worth preventing. The problem is that wage growth was zero percent in the last jobs report, indicating that a wage spiral is not currently taking place.

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Without the specter of a wage-price spiral, the Fed’s goal keeping them going is simply to reduce inflation reports. This is linked to his mandate. The problem is that the main driver of inflation today is energy. Higher rates have less of an impact on lowering energy prices at this time because prices are rising due to several years of underinvestment in the energy sector. So we’re looking at an economic scenario this fall where people are barely scraping by and the Federal Reserve has just raised their borrowing costs even higher. Hopefully, I’m wrong and when the next jobs report comes out, I can write an interesting summary of how and why I got my reading of the numbers wrong.

Mark Le Dain is vice president of corporate development for Neo Financial in Calgary.

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