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**JANUARY 9, 2023**
Kuttner on TAP
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**** The Labor Market and the Soft
Landing
The economy is on track to avert a recession, unless the Fed creates
one.
The jobs report for December, released by the Labor Department on Friday
<[link removed]>, was about as powerful
a rebuke to the Federal Reserve's perverse recession-mongering as one
could hope. It was also substantively very good news.
First, employers continued adding jobs-223,000 in December. That was a
slightly slower rate than the 260,000 average in the previous three
months, but enough to drop the unemployment rate to 3.5 percent,
matching a 50-year record low. All told, the economy added a prodigious
4.5 million jobs in 2022.
Second, workers who had been sidelined by the pandemic continued to
return to the labor force. The ratio of employment to population
increased slightly. For prime-age workers, the ratio rose to 80.1
percent, or just below its pre-pandemic level of 80.5 percent.
Third, wages increased, especially at the bottom, but not enough to be
accused of driving inflation. December hourly wages increased by 0.3
percent. That's an annualized rate of 3.6 percent, which closely
tracks the declining general inflation rate in recent months.
African American unemployment stood at 5.7 percent, reflecting a better
rate of improvement over the past year than for the workforce as a
whole.
But average wage gains for the workforce as a whole were modest. Coming
out of a pandemic-recession, this picture is about as good as things
get.
It shows a well-balanced labor market, with strong job creation, but not
so strong as to create inflationary labor costs. Gains to workers are
where we most need them, at the bottom.
Will the Fed appreciate that the economy is in good shape and take its
foot off the oxygen hose? Little by little, overwhelming evidence is
accumulating that the time for rate hikes is past.
It would sure help if the Democrats, who are a 4-3 majority of the Fed
Board of Governors-Lael Brainard, Michael Barr, Lisa Cook, and Philip
Jefferson-stopped worrying about their loyalty to the misguided Fed
chair, Jay Powell, and started showing a little backbone.
~ ROBERT KUTTNER
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