Tag: employment

President Joe Biden and the White House can celebrate the report as evidence the economy is continuing to hum along, and it will blunt attacks from Republicans over the administration’s spending policies. But senior officials in the West Wing were privately hoping for a less-robust number. So was Fed Chair Jerome Powell.

Here’s how the number is likely to play with four key political and economic figures.

Biden — The White House can view the report as evidence that economists’ predictions of an imminent recession are off-base. But inflation is Biden’s biggest enemy on the economy, and the report will cause some unease within the administration, given that it could mean the Fed will crack down harder on growth to curb prices.

Still, the report clashes with the expectations of many economists and Wall Street CEOs that the U.S. will fall into a recession this year.

Biden often describes the recent slowdown in job growth that preceded Friday’s number as a good thing as the economy transitions from the rapid Covid-19 comeback to a period of what he calls more “steady and stable growth.

Senior White House aides have said they are happy with declining numbers — as long as they stay positive — making it easier on the Fed to end the rate increases as soon as possible. They believe the decline in inflation is already well underway, with consumer price growth slowing for six straight months.

Biden wanted a good jobs number. But maybe not this good.

Powell — The report is likely to come as a jolt to the Fed chair. Powell said in a recent speech that the economy only needs to gain about 100,000 net jobs a month to keep up with the number of new people entering the workforce.

He’s strongly committed to bringing inflation to the central bank’s target range of 2 percent. Since the Consumer Price Index peaked last June at 9.1 percent, inflation has steadily fallen, hitting a still-high 6.5 percent in December.

Powell and the Fed on Wednesday again raised rates by a quarter of a percent, the eighth straight increase. But it was the smallest bump since March. He cautioned at his press conference that more hikes lay ahead, saying “the job is not fully done.”

Any single report can be an outlier and is unlikely to sway the Fed. But Powell is worried about the hot jobs market driving up wages, fueling inflation. So any news showing the market heating rather than cooling could be unwelcome.

“My base case is that the economy can return to 2 percent inflation without a really significant downturn or a really big increase in unemployment,” Powell said Wednesday. “I think that’s a possible outcome. I think many, many forecasters would say it’s not the most likely outcome, but I would say there’s a chance of it.”

In one positive sign for Powell, wages rose 0.3 percent in January, down from 0.4 percent in December. What the Fed chair fears most is a “wage-price spiral” in which higher wages drive prices and create a dangerous inflation cycle. That is not evident in this report.

Economist Larry Summers — The former Treasury secretary under former President Bill Clinton has long been saying that more Fed rate hikes will be needed to rein in the labor market. This report could offer more fodder for that argument.

Summers was among the few who predicted fairly early that inflation would soar and stay high for a long period of time. At the time of his initial call last February, the Fed, the White House and other Democrats were still assuring Americans that the inflation spike would be “transitory.” It wasn’t.

Summers has also repeatedly irritated the White House by suggesting that the trillions in new spending approved by Democrats in Congress and signed into law by Biden over the last two years played a role in the inflation spike.

He also maintained for months that the Fed’s rate-hiking campaign, while necessary, would almost certainly lead to significant recession and a near doubling in the unemployment rate. He has more recently softened his tone and been more receptive to the idea that a soft landing is even possible.

“I’m still cautious, but with a little bit more hope than I had before,” Summers said last month. “Soft landings are the triumph of hope over experience, but sometimes hope does triumph over experience.” This number is likely to get Summers to tilt back toward experience.

House Speaker Kevin McCarthy — The stunning jobs report will undercut the argument by McCarthy and other Republicans that Biden’s economy is fading fast under the weight of inflation, which they say is driven by big spending bills.

Still, the more aggressive the Fed feels it has to be in killing inflation, the higher the risk that the central bank will push the economy into recession. A slumping economy would give the Republicans ammunition to use against Biden and the Democrats in the 2024 campaign.