Job openings are a given in Washington, as in any major city in the United States. You go shopping for clothes and in the store there is a sign offering work. Likewise in the restaurant. Before the film begins, another, along with announcing upcoming releases, encourages people to ask for a seat at the cinema. And at the bank, a cartel is offering a transfer bonus of up to $1,500 as a demand for those who dare to work in the unit. The economy has been generating jobs at full speed after the pandemic and the unemployment rate is at 3.6%. In some states it has never been this low. The country has practically full employment.
Figures for the month of May, released this Friday by the Bureau of Labor Statistics, confirm the unemployment rate at 3.6%, the same as in April and very close to the low in decades, the 3.5% recorded just before the pandemic have been recorded. The economy has chained 17 consecutive months of job creation. In May, companies added 390,000 nonfarm jobs despite monetary tightening and interest rate hikes. Although this is the lowest value in recent months, it is significantly more than expected and not far from the figures of the last two months.
The most notable employment gains were in leisure and hospitality, professional and business services, and transport and warehousing, while retail employment declined.
In the United States, the labor market is measured with two main surveys: one from businesses and the other from households. The first serves as the main reference for the number of jobs created and the second for measuring the labor force and the unemployment rate. In this second survey, job creation was slightly lower (120,000 jobs per month), which together with the increase in the labor force left the unemployment figure at 5.95 million people, or 3.6%.
The President of the United States, Joe Biden, met this Friday to make a public statement on the development of employment. Biden is trying to get the message across that the economy is doing well despite inflation, which has become citizens’ top concern and has eroded his popularity. Biden has launched a communications strategy aimed at highlighting good economic news such as job creation. He also wanted to show that fighting inflation is his economic priority, although he attributes the leading role (and blame?) to the Federal Reserve.
This staging responds to fears that the inflationary complaints in the general election on March 8. This midterm election will see the 435 seats in the House of Representatives and just over a third of the 100 in the Senate renewed. The majority that emerges from the polls can block his legislative agenda for the next two years.
He knows all sides of the coin in detail.
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A poster for a Washington bank branch offers a bonus of up to $1,500 for working at the EL PAÍS entity
After the severe job destruction caused by lockdown, economic and monetary policies were geared towards reviving activity. The Federal Reserve flooded the markets with liquidity through purchases of financial assets and low interest rates. The administration handed out checks to the right and left. The closest metaphor to throwing money out of a helicopter is Milton Friedman’s happy metaphor, popularized by Ben Bernanke. This allowed activity to sustain and underpin the recovery, but as demand strengthened, some supply issues (supply chain blockages, restrictions in China, the war in Ukraine and the consequent rise in energy and food prices. .. ) have translated this excess liquidity into inflation. Prices are rising more than 8%, the fastest in 40 years.
The US Federal Reserve has received a dual mandate from Congress: to achieve full employment and price stability. While he has honors in the first subject, he fails in the second. Their defenders argue that the Fed avoided a long recession, that mid-takeoff it wasn’t time to shut down the plane’s engines, and that much of the price hikes were exogenous and could not have been avoided with tougher monetary policy . Its critics point out that the central bank misjudged the risk of inflation and did not withdraw monetary stimulus in good time.
Now that unemployment is low and inflation high, the Fed is tightening monetary conditions swiftly, both by raising interest rates and reducing its balance sheet. And also with its messages. In fact, market interest rates, and with them mortgage rates, have always risen faster than official interest rates. The Fed, which raised interest rates by half a point in May, the largest in 22 years, plans to make at least two more hikes of the same amount in June and July, and some of its members are already warning that more may be needed.
The big question is whether the Fed will be able to contain inflation without triggering a recession. The road to this goal is narrow.
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