Federal Reserve Chair Jerome Powell fielded questions for around 40 minutes on Wednesday following the central bank’s decision to impose another large interest rate hike, but not a single reporter asked about the extent to which record-high corporate profits are fueling inflation even as companies openly boast about their pricing power. Progressive economists have estimated that corporate profits are to blame for at least 40% of price increases during the recovery from the pandemic-induced downturn, a disproportionate contribution to the stubbornly high inflation that is eating away at workers’ wages. Some have put the number at over 50%. The notion…
Unemployment
Throwing People Out of Work Is No Way to “Fix” the Economy
From groceries to rent, prices are rising on just about everything these days — and those with already-stretched budgets are feeling the pinch. Bringing prices down must be a top priority for lawmakers, but Washington’s default tool for dealing with inflation — aggressive interest rate hikes — only makes life harder for these families. That’s because aggressive interest rate hikes work by increasing unemployment and slowing down wage growth, a “cure” far worse than the disease. Former Treasury Secretary Larry Summers is a longtime advocate of this cruel approach. Earlier this summer, Summers cheered the idea of throwing millions out…
Unemployment Due to Voluntary Quits Falls in May Amid Strong Job Growth
The economy added 390,000 jobs in May, while the unemployment remained unchanged at 3.6 percent for the third consecutive month. The May report showed clear evidence that the labor market is normalizing with wage growth continuing to slow. The annualized rate of wage growth comparing the last three months (March, April, and May) with the prior three months (December, January, and February) was 4.3 percent, down from the 5.2 percent year-over-year increase. This is only moderately higher than the peak 3.6 percent year-over-year rate hit in February 2019. This means that if we are concerned about underlying inflation rather than…
Labor Force Participation Continues Toward Pre-Pandemic Levels
The economy added 428,000 jobs in April, while the unemployment rate remained flat at 3.6 percent. The unemployment rates for white workers (3.2 percent), Blacks (5.9 percent), Asians (3.1 percent), and Hispanics (4.1 percent) were all virtually unchanged from the previous month. Labor Force Participation Gains Slowed, Still Approaching Pre-Pandemic Levels The overall labor force participation rate (LFPR) declined 0.2 percentage points to 62.2 percent, returning to the January 2022 level. This marks the first time since May 2021 that the LFPR has experienced a month-over-month decline. For prime age (25 to 54) workers, the LFPR is still below their…