Friday, 01 Nov 2024

Here's why the shockingly good jobs report is going to cost you


Here's why the shockingly good jobs report is going to cost you
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The US economy feels lousy for so many people. So you'd think some really, really, shockingly good news about the job market would give Americans' spirits a boost.

It won't. Here's why: Inflation is still biting. Prices continue to rise faster than anyone would like. Although annual price increases aren't in wild-runaway mode like they were when inflation was above 9% last year, inflation is still above 3%, which is unhealthy for the economy, according to the Federal Reserve and a number of economists. (The Fed believes 2% inflation is ideal over the long haul.)

When you see gas prices at $3.75 on average (and above $4 in plenty of places across the country), mortgage rates above 7% and at a 23-year high, food prices going up at the grocery store, and a restart to student loan payments for millions of Americans, that's why a majority of Americans say President Joe Biden's policies have made economic conditions worse, according to a CNN Poll conducted by SSRS.

As prices continue to grow, paychecks are barely keeping pace. They grew 4.2% over the past year, the slowest pace of growth since the early days of the pandemic in 2020.

So a robust job market won't make most people feel like the economy is strong.

In fact, a strong job market may ultimately make many Americans feel worse. How? The Fed is working to slow the economy by hiking interest rates - the only tool it has to fight inflation. A still-robust job market - see the 336,000 jobs added last month - means the central bank could continue to increase rates without fear of sending the economy into a recession.

"The economy is roaring with the demand for workers literally through the roof," said Chris Rupkey, chief economist at FwdBonds, in a note to clients on Friday. "Interest rates are likely to remain higher for longer to ensure the inflation fire is out."

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