The US jobs report was a warning sign - even before the Omicron surge Robert Reich

[Uncle Joe]

Friday’s jobs report from the Department of Labor was a warning sign about the US economy. It should cause widespread concern about the Fed’s plans to raise interest rates to control inflation. And it should cause policymakers to rethink ending government supports such as extended unemployment insurance and the child tax credit. These will soon be needed to keep millions of families afloat.

Employers added only 199,000 jobs in December. That’s the fewest new jobs added in any month last year. In November, employers added 249,000. The average for 2021 was 537,000 jobs per month. Note also that the December survey was done in mid-December, before the latest surge in the Omicron variant of Covid caused millions of people to stay home.

But the Fed is focused on the fact that average hourly wages climbed 4.7% over the year. Central bankers believe those wage increases have been pushing up prices. They also believe the US is nearing “full employment” – the maximum rate of employment possible without igniting even more inflation.

As a result, the Fed is about to prescribe the wrong medicine. It’s going to raise interest rates to slow the economy – even though millions of former workers have yet to return to the job market and even though job growth is slowing sharply. Higher interest rates will cause more job losses. Slowing the economy will make it harder for workers to get real wage increases. And it will put millions of Americans at risk.

(snip)

https://www.theguardian.com/commentisfree/2022/jan/09/us-jobs-report-warning-sign-even-before-omicron-surge

[stopdiggin]

1. inflation is more or less 'locked in'

for the economy - probably through the next year at least. I don't anticipate that the Fed response is likely to be draconian - and in all probability the job market will be responding to quite a lot of other factors (than rate hikes) over the same ensuing period. Our economy (and workforce) have most likely been somewhat permanently changed by the pandemic - and that is something that is just going to have to shake out for itself over time - quite independently of any actions by the Fed.