The jobs report was good. Is the economy good too?

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It might be time to open up a sudden possibility here, at least if you’ve been paying attention to the chatter going on around you High-end hairstyles And potential recession. The economy seems to be… somewhat in a very decent place.

Employers added 517,000 jobs in January, according to the latest report According to the Bureau of Labor Statistics, the unemployment rate fell to 3.4 percent, its lowest level since 1969. Job growth has been broad across sectors, meaning plenty of gains across the board. (there Some confusion About the numbers for this specific report as the reporting data has changed; Still, This figure and the general path Very strong.) Elsewhere in the economic data, Job openings increased in December And Weekly jobless claims remain low. American economy It grew faster than expected In the fourth quarter of 2022.

Things are not perfect. the The housing market is strugglingTechnology companies It seems to cut Parts of their labor force left and right, and economic inflation It’s still here and shrinking wage growth, although it’s slowing. How far will the Fed go to tame inflation? An elephant in the room herewhich could cause the recession everyone has been talking about for months.

Still, with all the talk about the economy, it seems like the sky is staying where it is now. I called half a dozen economists to ask the question many people are now asking: Is the economy good? The answer – with many caveats – was generally the answer.

“If you want a sexy one-word answer, the answer is yes,” said Justin Wolfers, an economist at the University of Michigan. “Unemployment is at its lowest level in 50 years, and that’s the standard measure for thinking about how the economy is doing,” he said. “Job growth is continuing, so it’s not only good, it’s getting better, and it’s getting better at a really fast rate. In 2022, we added the second-highest number of jobs in recorded history, up until 1939.”

“Hundreds of thousands of people are having jobs, and the unemployment rate is at its lowest level in 50 years, we shouldn’t be wondering if this is good or not,” said Claudia Sam, former chief economist at the Federal Reserve. But she noted that the situation is still complex. “This does not mean that we have ‘mission accomplished’; inflation is still high.”

“Overall, the nominal economy is very strong, the labor market is very hot, and the problem is that the gains we’re getting have been hit by inflation,” said Mark Goldwyn, senior vice president and senior policy director for the commission. responsible federal budget. “Obviously we’re not in a recession, I don’t know why people say that. But the big question is, what needs to be broken?” negative.

It is impossible to predict the future, and so was the economy Very strange for a while It turns out that a global pandemic has the potential to throw a lot of things off, as did Russia’s war on Ukraine, among other factors. inflation Makes everything feel terrible.

However, for all the economic negativity that’s been going on lately, it might be a moment for at least some modest optimism, recognizing that there are no guarantees going forward.

Despite all the headlines about job cuts in tech, finance and media (Including the media company that owns the website you’re reading now), the job market looks really good. The recovery from the pandemic, during which millions of people lost work, has been fast and strong. According to the search From the Cleveland Federal Reserve, workers who were displaced during the COVID-19 recession saw better earnings and employment outcomes than workers who lost their jobs during previous recessions.

“It’s pretty clear that the investments we’ve made in people during the pandemic have really paid off,” said Rakine Mabod, an economist at The Groundwork Collaborative, a progressive think tank. “It tightened the labor market, drove wage gains, especially at the bottom, and people had more agency.”

Headlines about layoffs and a looming recession can make you wonder if these things “come from different worlds” when looking at data like the January jobs report, said Nick Pinker, director of economic research at Indeed. “There are some segments that you’re going through now, and they’ve got a lot of attention,” he said.

Much of the talk about layoffs centers around places like Google and Goldman Sachs and ignores similar pointers, such as Chipotle employs 15,000 people Whatever season the burrito has Wal-Mart had to raise its wages to compete. “There are very different stories for different sectors, and the sectors that employ more people have a much more rosy outlook right now,” Pinker said.

Heather Boshey, a member of the White House Council of Economic Advisers who literally sneered at me when I asked her if the economy was good (and obviously a little biased here), said it was hard to look at an unemployment rate of 3.4 percent and “I don’t think this is a job market.” Good and strong.” She added that 12 million jobs were added to the economy under President Joe Biden and indicated 10 million small business applications as well. She said the tech and media workers’ job losses are “very important” but also “very online,” and drew attention to the gains being made by workers on the lower end of the income spectrum. “The extent to which we’re seeing job creation across the United States, and the extent to which we’re seeing that for low- and middle-wage workers, I think that bodes well going forward,” she said.

Inflation has eroded wage gainsand, in many cases, the raises that workers received diminished, If not completely eliminatedby rising prices. But many people are at the bottom of the income spectrum They saw real wage gains Even with inflation, said Mike Konzal, director of macroeconomic analysis at the Roosevelt Institute, a progressive think tank. Landscapes are starting to improve with some inflation dropping, but not for all. “Wage increases have generally increased in the third-lowest paying jobs,” he said.

At the same time, part of the goal here on the Fed’s side is to moderate wage growth across the board, which is what recent jobs reports, including the January report, suggest is happening. Labor costs It rose slower than expected Also at the end of 2022. Strange to say, but to an extent, if you’re worried about the central bank driving the country into recession, Slowing wage growth can be a good thing. “This is a question of what the Fed will rely on to understand the impact of employment on inflation,” Pinker said.

If the Fed looks at slowing wage growth and thinks the economy is starting to stabilize, it might ease up on interest rate hikes and put the country on a soft landing path, which means no recession. If the Fed looks at the unemployment rate and decides it’s too low and needs to go up, it could get more aggressive in raising interest rates and push the economy into recession. “We might go back to the ‘good news is bad news’ story, and boy, it’s all right now, and that means the Fed isn’t just going to pull the punchball, they’re going to take the ball away and throw it at everyone’s heads,” Bunker said.

Mabod said she worries about what she calls “Federal Reserve Chairman Jerome Powell’s war on workers” and noted that the unemployment rate remains at 5.4 percent for black workers, nearly double the 3.1 percent rate it was for white workers. We have to raise the bar even higher, she said, “we have to raise our bar even higher, right this moment.” “It is quite clear that you do not need massive levels of unemployment in order to bring prices down.”

Inflation has slowed from its 2022 highs in recent months, but is still well above the Fed’s 2 percent target. Consumer price index It rose by 6.5 percent annually in Decemberwhich is still above Where was the pre-pandemic stage?. The ramifications of that are twofold: first, inflation remains a drag on the economy, and second, what the Fed continues to do to deal with it could be even greater.

“Right now the economy is healthy except for high inflation and response, and the real question is, what do the inflationary environment and response effects, higher interest rates, etc., mean over the next year?” Goldwein said.

There have been a lot of calls for the Federal Reserve Pull her foot off the brake to increase interest rates. In early February, the Fed raised interest rates by a smaller amount than it has done in other cases over the past year but indicated It continues to witness “continuous” increases. to move on. Some economists note Powell She has been looking brighter lately than it was in the recent past.

The pessimistic case here – And one that many smart people make Will it inevitably lead to an economic downturn? The optimistic state is that it calms down and things continue to hum.

No one I spoke to was willing to rule out the possibility of a recession in the near term. No one thought the recession was a foregone conclusion, either.

“With inflation as high as it has been, and as stubborn as it has been, people were worried that the Fed would cause a recession, but it seems unlikely that they will, and it seems like a lot more of an option now,” Gonzale said, explaining that Shift from where we were. “There was a period last summer where it took a lot longer for inflation to start crashing than people expected.”

“Recession is not here, it’s not inevitable,” Sahm said. “You can tell the story of a recession later this year, and you can tell the story that we’re avoiding it.”

There is no doubt a host of reasons to feel concerned about the economy. High, even improving, inflation continues to be a problem. If you’re trying to buy a home right now, you’re really in trouble. High interest rates Make borrowing expensive. All this talk of stagnation is It’s understandable to make people nervous And it caused some consumers to decline. The number of layoffs happening right now may not be a huge part of the workforce, but they can be contagious, and if things go wrong, they can turn around quickly.

However, Poljanich shouldn’t be heard here – it’s not the worst thing in the world to take some respite from economic gloom. For all the interest in downside risk, why not at least consider the possibility of upside risk as well?

“What are the odds that the Fed is in? That could happen. Or what are the odds that the economy doesn’t have quite as hard swaps as you think?” Wolfers said. “It’s hard to be confident about anything, and if it’s hard to be confident about anything, we can have good news.”



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