It was a classic time to spin. The Bureau of Statistics of the U.S. Department of Labor released the employment data for November, and they were disappointing, and they were encouraging.
They were disappointed, because less than half of October’s jobs were added in November: 210,000, the lowest number during Joe Biden’s presidency. Economists expected an increase of half a million. By the way, this is not the first time this year that a very optimistic forecast is almost unfounded.
They are encouraging, as unemployment has fallen to 4.2%, the lowest rate since the outbreak of the corona crisis in March 2020. Its rate in the previous month was 4.6%. The number of new entrants to the labor market was approximately 600,000, evidence of alleviating the shortage of working hands.
This shortage set aside the spring and summer months, giving the impression that senior workers are staying at home, because government unemployment benefits pay them more than wages. The grants have come to an end anyway, in most cases; And employers have begun offering wage increases and benefits. November data show that the average wage in the economy has risen by 4.8% in the last 12 months.
The politicization of statistics is a common thing in the U.S. But the fluctuations of recent months have been unusual. Every month, sometimes every week, has refuted the month, or the previous week.
On November 29, the president himself tweeted: “Since I was sworn in, on January 20, we have seen a record increase of 5.6 million jobs – more jobs than have ever been created in U.S. history.”
Since I was sworn in on January 20th, we’ve seen a record 5.6 million in job growth- with more jobs created at this point than ever before in American history. We’ve made enormous progress and we’re on our way to building an economy that ensures no one is left behind. pic.twitter.com/Lmbc7kbrrU
– Joe Biden (@JoeBiden) November 29, 2021
Republicans saw the half-empty glass in Friday’s data, and found a sympathetic ear in the media. In fact, the Wall Street Journal, whose editorials reflect a conservative right-wing stance in politics and the economy, rejected the Republican spin. He believed that the new data showed a strong enough economy to allow the central bank to raise interest rates at the beginning of the year.
Inflation is no longer temporary
All streams flow to the Federal Reserve Open Market Committee. It came to the rescue of the economy from the early days of the Corona, with the massive loosening of the Strip. Even as inflation began to knock on the door, the governor and his deputies described it as typical of a time of rapid and “temporary” recovery.
The term “temporary” has disappeared from the vocabulary. Gov. Jerome Powell himself spoke last week about “mismatch between supply and demand, bottlenecks [באספקה] And an outbreak of inflation. ”
Separately, he told the Senate Banking Committee that “the danger of inflation rising” has increased, and the bank is ready to bring its “cheap money” policy to an end. The bank’s six-week meeting next week will hint at the following. But the markets are already preparing. An evil spirit has gripped them since the Senate hearing: indices have plummeted and bond yields have soared.
There is, of course, a close link between interest rate policy and the labor market. The law requires the central bank to try and ensure full employment. In any case, if there is a setback in the labor market, and if expectations are not met, the bank may reconsider. Doubt it will happen this time.
The president appointed Powell for a second term just days before the Senate hearing. In the appointment announcement he praised the governor for his leadership in the darkest days of the crisis. This governor withstood heavy pressure to advance and tighten the belt. He did not. But there is no escape from the tightening.
They did not go out to dinner
Something went terribly wrong with White House expectations. The president expressed his frustration last month. “Thanks to the strength of our economic recovery,” he said, “American families could buy more products. But, guess what they did not – they did not go out to dinner, or lunch, and did not go to the local well, because of the corona. So what do they do? They stay at home, they order online, and they buy products. ”
In other words, cars and refrigerators yes, hotels and restaurants no. The services economy has not kept pace with growth. It is easy to see the discrepancy by looking at the sub-indices. The price index for durable goods has risen by 13.2% in the last 12 months, while the price index for services has risen by only 3.6%.
The “cheap money” was not evenly distributed throughout the economy. He financed a shopping spree, which miraculously enriched the marketing chains, just the supply pipes and ignited inflation. Where did the administration go wrong? Probably in assuming the normalizing speed of American life if everyone gets vaccinated, and if everyone wears masks, and if everyone is careful in the round, and if unexpected variants do not emerge around the corner.
Welcome to the “split government”
Inflation is now the greatest danger to the president’s political well-being. At least for the time being it casts a long shadow over all his other actions, and it threatens in the blink of an eye: an allocation of nearly two trillion dollars to social spending and climate initiative.
The president initially hoped to get $ 3.5 trillion, but even after giving up nearly half of the funding he is having a hard time recruiting the very cramped Democratic majority in the Senate to vote in her favor. The main argument against it is that the plan will increase the national debt and fuel inflation.
This will probably be the last major legislation of the Biden administration. The United States is entering an election year of what is called “mid-term.” Next November it will elect a new Congress, and there is almost unanimity that Republicans will occupy at least one of the two houses of Congress, putting an end to the administration’s legislative capacity.
Why can the US anticipate the next two years of what is called a “split government”? All we need to do is look at last week’s struggle for temporary funding for government operations and the struggle that will be abandoned in the coming days on December 15 to raise the government’s debt ceiling.
It’s just unbelievable that the greatest democracy in human history, the world’s leading economic power, has been stuck in the same place over and over again for decades, because its two parties probably hate each other more than they love their country.
Just for the point
Speaking for her is the willingness to bring parts of the federal government to the brink of closure just for the sake of the point, and endanger the well-being of the financial system (imagine what will happen to America and the world if the U.S. government falls into insolvency for the first time).
Republicans in the Senate have given their consent to a temporary extension (until February) of government funding in a waiver by the administration of its intention to oblige the private sector to enforce vaccines against Corona and masks on workers. This “mandate” is about to apply to 84 million workers, although Republican-controlled states are waging a fight against it in the courts. Vaccines and masks have already transcended the boundaries of rational discourse in the United States, and are part of a “culture war.” Republicans, or at least some of them, hope to derive electoral benefit from this culture war.
They failed to impose their will on the Senate last week because Democrats have a tiny majority. But only extraordinary luck will allow Democrats to hold that majority after the midterm elections. Prepare for even more dysfunction in the American system.