6 June 2024


Cogito Ergo Non Serviam

US Economy Added 272,000 Jobs in May

The US economy added 272,000 jobs in May, exceeding expectations. At the same time, the unemployment rate ticked up to an even 4%. This ends a record-setting, 27 month period in which that rate was under 4%. The last time that happened was in the 1960s. The report gives the Federal Reserve grounds to delay its long-awaited rate reduction. In all likelihood, this has postponed that event for at least another month. The economy is doing just fine, and this fixation on an inflation rate that most nations would kill to have is rather pointless. Nevertheless, that will be the policy decision.

The Bureau of Labor Statistics reported, "Total nonfarm payroll employment increased by 272,000 in May, higher than the average monthly gain of 232,000 over the prior 12 months. In May, employment continued to trend up in several industries, led by health care; government; leisure and hospitality; and professional, scientific, and technical services."

Wages rose 4.1% keeping workers ahead of inflation. This is what troubles the Fed. If people have more money in real terms than before, they are likely to spend it. More spending creates inflationary pressures, and the Fed is determined to stamp out even the threat of that pressure. What they miss is that excessive profits do the exact same thing, but their eyes are not on those figures. Asset inflation is not seen as a problem, although it causes hell for people trying to buy their first home. Ask anyone looking right now for a starter home,

The world will probably see rate cuts happening in Europe before they occur in the US. The economic pressures of the Ukrainian war and migration issues as well as differing central bank cultures suggest that some European nations are comfortable with cuts. When those come while the US holds the line, the dollar will rise in strength, putting American exporters at a disadvantage.

Meanwhile, those exporting to the US will be able to increase their home currency prices for goods and services without causing US inflation. They will be bringing it back home instead.

It would be far better if they coordinated rate reductions, but they will not. The argument will be that the economies of the various nations are in different places in their fight against rising prices so the rate decisions must be different.

The trouble with all of this is that the economy in the US is doing just fine. If a person needs a job, there is most likely a job there for him or her. Starting a business is expensive with current interest rates, but businesses are starting up and making money. Consumers are still able to make necessary purchases and some that are not so necessary, but it does cost more to do so on credit. If this is not the time to declare victory and move on, when is that time? It seems the Fed really does need to see a recession to believe it has succeeded in stifling inflation.

The Biden administration does not need a rate cut to win the election, but a cut would probably ensure a Democratic victory in November. The Fed governors do not care which party is in power, although they do insist on their independence which Mr. Trump threatens. It is not impossible but it is improbable that they would cut or not for political reasons.

Instead, they will do what their perception of the economy demands of them. The coincidence of a cut with the election will be just that, coincidence. Mr. Biden is fortunate like Messrs. Reagan and Obama in having his economic crisis at the beginning of his term.

© Copyright 2024 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.

Kensington Review Home



Follow KensingtonReview on Twitter


Wholesale NFL Jerseys Wholesale NFL Jerseys Wholesale NFL Jerseys Wholesale NFL Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys Cheap Basketball Jerseys