The national unemployment rate rose slightly in October, to 3.7%, but U.S. employers added 261,000 jobs in the same month, a sign of continued strength in the labor market despite several recent interest rate hikes by the Federal Reserve. President Biden was quick to celebrate job growth news, released by the U.S. Bureau of Labor Statistics on Nov. 4, noting in a statement that jobs have been added “every month of my presidency, a record 10 million increase in employment…[with] historically low unemployment rates among blacks and Hispanics, rising gross domestic product and rising incomes.
So was the report good news? Well, yes, if you are an American worker. A persistently low unemployment rate means that it is more difficult to hire or replace you, and that should mean better wages, although so far wages have lagged significantly behind inflation.
The report was not so good for Federal Reserve Chairman Jerome Powell. Powell was hoping for a sign that federal monetary policy was starting to cool the US economy. The US central bank has now issued four consecutive 0.75 percentage point hikes this year, bringing the short-term borrowing rate to a range of 3.75% to 4%. This is its highest level since January 2008.
Central bank interest rate hikes are aimed at suppressing aggregate demand and making it less likely that U.S. businesses and manufacturers will ramp up production and hire more workers.
These central bank rate hikes are intended to suppress aggregate demand and make it less likely that U.S. businesses and manufacturers will ramp up production and hire more workers. Rising unemployment would be an indicator that monetary policy is starting an economic feedback loop that should slow inflation and perhaps signal that Powell may be considering more moderate adjustments in the near future.
Many economists sympathetic to Mr. Powell’s goals essentially want more people to lose their jobs. But is higher unemployment really the best mechanism to thwart inflation, given the suffering it would mean for hundreds of thousands of American families?
Tony Annett, author of Cathonomics: how the Catholic tradition can create a fairer economy, says some economists have calculated that bringing inflation back to the 2% rate sought by Mr Powell would mean putting 1.5 million people out of work in the United States. He recently spoke with Sebastian Gomes, the host of America Media’s “Voting Catholic” podcast,
The tough guys might call this a desirable outcome; Mr Annett, senior adviser to the Sustainable Development Solutions Network, said it would be “a human tragedy”. Rather than viewing low unemployment as a worrisome indicator demanding a more ruthless response from policymakers, “we should be very happy…that unemployment is at a 40-year low, and we want it to happen.” maintain”.
“We should be very happy… that unemployment is at its lowest level in 40 years, and we want to keep it there.”
He thinks the church has wisdom to share with policymakers like Mr Powell. Its appreciation of the common good can unite individuals and families of all classes and can guide social and economic policy in times of distress. In an economy guarded by Catholic social teaching, he said, policymakers should keep humanitarian effects at least as high a priority as the rate of inflation. The church’s preferential option for the poor would require US policymakers to couple the fight against inflation with credible investments to support the unemployed.
The preferred option judges all policies “first and foremost by how they affect the fewest of us”, he said. “With inflation, this is particularly important because when inflation is fueled by particularly high food and energy costs, it makes up a significant portion of the budgets of the poorest people in the country.”
Catholic social teaching, Mr. Arnett said, attempts to navigate between two ideological rocks that can wreck a nation – on the one hand a communist collectivism that erases the individual and on the other a libertarianism, or market ideology. free, which erases the common good. “Politicians who take a middle ground,” he said, “use the power of government to protect people from bad economic effects.
“So, for example, what policies are proposed to protect the poor from continued high inflation? What policies are proposed to keep unemployment low?
Unfortunately, the United States has so far shown no interest in this kind of humanitarian about-face. In fact, policies put in place during the Covid-19 pandemic that proved effective in reducing poverty – such as the conversion of the annual child tax credit into pro-rated monthly payments – have already been abandoned.
And in terms of social assistance for laid-off workers or others struggling to find jobs, the United States ranks near the bottom in per capita spending among other advanced economies. If the fight against inflation remains the top priority of American political leaders, this suggests that the newly unemployed could be left alone in the face of this monetary storm.
Inflation is surely hard on workers; more difficult still is to be laid off. Options that distribute the economic pain of fighting inflation to the wealthiest people (for example, by limiting corporate profits), as well as targeted infrastructure investments aimed at breaking chain bottlenecks supply, should be given priority before accepting a curb on inflation. by job loss.