The Jobs Report — Politicized Like Everything Else
Author: Greg Valliere
June 7, 2024
VIRTUALLY EVERYTHING IN AMERICA IS POLITICIZED, so why shouldn’t the unemployment report provoke a chorus of critics who are preparing to speak out if this morning’s jobs report shows a cooling in the labor market?
DEMOCRATS IN THIS TOWN are increasingly nervous about the election — as polls show voters blame President Biden for high interest rates and the impact on housing. These Democrats are getting an earful from constituents who want lower rates this summer.
IF THE ECONOMY IS THE BIGGEST ISSUE OF THE CAMPAIGN, the Democrats have to worry. Inflation has stubbornly stayed above the Federal Reserve’s target of 2% — and while cooler GDP growth may warrant Fed rate cuts, the Fed is in no rush, as several governors have proclaimed.
SIGNS OF SOFTENING ARE APPARENT in the Atlanta Fed’s “GDP Now” report, which has moved erratically lower in recent weeks. Signs of weakness are clear in commercial real estate, and now the labor market appears to be weakening; many analysts are taking the “under” for this morning’s jobs report; consensus is for a rise in nonfarm payrolls of 180,000, with the jobless rate at 3.9%.
IN APRIL, the U.S. economy added 175,000 jobs, while the unemployment rate rose to 3.9% — both figures were weaker than market expectations.
THIS HAS MOTIVATED LIBERALS, led by New York Times columnist Paul Krugman, to argue that the economy needs more monetary accommodation immediately. Krugman has followers in Congress, mostly Democrats, who may become increasingly outspoken this summer over what they see as restrictive monetary policy.
THE WHITE HOUSE has been reluctant to comment on interest rates but high rates and a softening economy will become a dominant economic issue this summer. Populists like Sherrod Brown, in a very tight race to keep his Ohio Senate seat, may begin to complain about Fed policy — and others could follow Brown.
WITH CENTRAL BANKS FROM CANADA TO EUROPE cutting rates, the U.S. Fed may have to speed up its timetable. While a rate cut is unlikely at the June 11-12 FOMC meeting, a 25 basis point reduction isn’t out of the question at the July 30-31 session — accompanied by dovish rhetoric from Chairman Jerome Powell.
FED POLICY IS DATA-DEPENDENT but if the politicians begin to howl about tight monetary policy this summer, a market-friendly rate cut could be coming before Labor Day. Whether that would be enough for the struggling Democrats remains to be seen.
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