Labor is on the Fed’s side against inflation
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Gabriel Rubin
WASHINGTON, Oct 10 (Reuters Breakingviews) -U.S. Federal Reserve Chairman Jerome Powell faces a central banker’s most difficult task: cooling out-of-control price rises without choking the labor market. Conventional wisdom holds that these goals are in irrevocable tension. But now, labor is doing its part to reconcile the two. A steady flow of new workers and an uptick in productivity mean still-high wage and job growth isn’t stoking inflation, as evident in figures released Thursday. With the Fed eyeing further rate cuts, the risk now is that an immigration-hostile administration or fading output gains topple the balance.
The September consumer-price index report shows inflation falling to a three-year low. While slightly hotter than expected, at 2.4% year-over-year, it is barely over the Fed’s target. The tepid reading justifies Powell’s turn in August to focusing attention on incipient labor market cracks. There, too, progress came in last week’s employment report, with the economy adding a booming 254,000 new positions and the unemployment rate falling to 4.1% from 4.2% in August.
This seems contrary to economists’ standard warnings. Two key metrics provide a clue as to how it happened. Earlier in the recovery, the ratio between open roles and available workers hovered near 2-to-1, giving workers outsize leverage and propelling them to switch jobs and earn huge raises. That ratio is now closer to even — partly because positions were filled on the employer side, but also because new entrants added to the labor supply. The percentage of men ages 25 to 54 in the labor market is now 83.8%, a level not seen since 2001. Immigrants boosted the workforce, rising from 14% of workers in 2019 to almost 16% in 2023. Higher productivity improves the picture: While wage gains remain high at around 4% annually, worker output has outpaced its average between 2010 and 2019. Rather than bidding up costs without any offsetting benefits to employers, gains are now accruing to both, increasing the economy’s potential.
There’s some evidence that a flurry of new business formation in the wake of the pandemic is boosting productivity through competition and innovation. The danger is that there’s no guarantee that this trend will continue. Just look at job-switching, another post-Covid phenomenon, which has already faded. Meanwhile, labor supply would be threatened by a shift to more hostile immigration policy - an eminent possibility if Republican Donald Trump wins November’s election for the White House. For now, though, the labor force has helped the Fed stamp out inflation. Powell is trying to return the favor.
Follow @Rubinations on X
CONTEXT NEWS
U.S. consumer prices rose 2.4% over the prior year in September, the Bureau of Labor Statistics said on Oct. 10, the lowest inflation reading in three years. The report follows employment figures released Oct. 4 that showed the unemployment rate ticking down to 4.1%.
The Federal Reserve cut its benchmark interest rate by 0.5 percentage points at its September meeting, with further cuts anticipated.
Job openings per available worker have returned to normal https://reut.rs/3BBvo3w
Labor productivity is outpacing the 2010s https://reut.rs/3NiTYZx
Editing by Jonathan Guilford and Pranav Kiran
免责声明: XM Group仅提供在线交易平台的执行服务和访问权限，并允许个人查看和/或使用网站或网站所提供的内容，但无意进行任何更改或扩展，也不会更改或扩展其服务和访问权限。所有访问和使用权限，将受下列条款与条例约束：(i) 条款与条例；(ii) 风险提示；以及(iii) 完整免责声明。请注意，网站所提供的所有讯息，仅限一般资讯用途。此外，XM所有在线交易平台的内容并不构成，也不能被用于任何未经授权的金融市场交易邀约和/或邀请。金融市场交易对于您的投资资本含有重大风险。
所有在线交易平台所发布的资料，仅适用于教育/资讯类用途，不包含也不应被视为用于金融、投资税或交易相关咨询和建议，或是交易价格纪录，或是任何金融商品或非应邀途径的金融相关优惠的交易邀约或邀请。
本网站上由XM和第三方供应商所提供的所有内容，包括意见、新闻、研究、分析、价格、其他资讯和第三方网站链接，皆保持不变，并作为一般市场评论所提供，而非投资性建议。所有在线交易平台所发布的资料，仅适用于教育/资讯类用途，不包含也不应被视为适用于金融、投资税或交易相关咨询和建议，或是交易价格纪录，或是任何金融商品或非应邀途径的金融相关优惠的交易邀约或邀请。请确保您已阅读并完全理解，XM非独立投资研究提示和风险提示相关资讯，更多详情请点击 这里。
