Once again, on Friday, Americans were presented with the strange dichotomy of a fantastic jobs report, showing that the economy continues to grow and Americans are seeing an unprecedented opportunity, and a sharp, negative reaction from the Stock Market.
The superficial reason is easy enough to see. The market rose sharply over the last few weeks after members of the Federal Reserve hinted that future increases in rates would come in terms of 50 basis points, rather than 75. Or, as most people would say, they’re thinking about raising interest rates by just 0.5% rather than 0.75%. The markets took that as a sign that the Fed was seeing signals of slowing economic growth. Which, in Wall Street think, was a very good thing, because their biggest concern is that increased interest rates could make other forms of investment more attractive than putting money into stocks. So the Fed talking about slowing the pace of rate increases was enough to stimulate a big market bounce.
Now that job growth has beaten the estimates again, the markets are screaming in anticipation that the Fed might just decide to crank up rates more than they expected, and the air has gone out of the ball. This is not, as some outlets are stating, any reaction to actual inflation. Inflation has been a great cover for corporations, who have increased prices far faster than their own costs would mandate. Rising inflation has been an excuse for corporations to pull down record profits in almost every sector. They don’t care about inflation. They do care about interest rates.
The reason that the economy continues to generate so many jobs isn’t hard to determine—President Biden built it that way. While many presidents, in particular Republican presidents, disavow any control over the economy, Biden knows exactly where the levers are located. Especially those which can funnel growth toward working-class Americans.
The American Rescue Plan, which Biden signed less than two months after taking office, provided funds that not only greatly expanded the availability of COVID-19 vaccines, but also established a pipeline that has generated jobs at every level. That plan included funds to see more workers trained in skilled vocations where demand is high, from construction to health care. It expanded job opportunities for underserved communities and put serious funding behind breaking down barriers between would-be workers and jobs.
Then, before his first year was out, Biden did what Trump never could: He signed a bipartisan infrastructure bill that immediately put Americans to work not just in repairing bridges and building new roads, but also in extending data networks into rural areas. That bill isn’t just creating jobs directly; it's boosting employment indirectly and helping out communities where local economies were collapsing, in the same way that rural electrification helped to save the rural south a century earlier.
In August, President Biden signed the Inflation Reduction Act, which represents America’s greatest-ever investment in renewable energy. That bill funds projects to address the effects of climate change, and lowers prescription drug prices—all while greatly reducing the federal deficit. It’s safe to say the money men are not so happy about any of this, especially because that same bill has a whole host of provisions designed to help small businesses while imposing a minimum tax on corporations and (this one really stings for the big money guys) a 1% surcharge on stock buy-backs.
The economy is creating jobs because President Biden took steps to create jobs—especially good jobs in growing areas. But, in spite of everything those bills have done to help diversify the recovery and channel new wealth to the working class, not everyone is benefiting equally.
When it comes to jobs, all the boats are rising. But some of those boats had a head start that is still not being overcome. Additional effort is going to be needed to bring all the lines in that chart together and see that opportunity truly is equal.
When it comes to inflation, there are signs that rates are easing—not just in the United States, but around the world. Inflation has slowed across the board since October, with some analysts believing that prices may have peaked. Sharply falling gas and energy prices should go a long way to ease inflation pressure in the United States. Just because job numbers are up and the market fears how the Fed will react, that does not mean actual inflation will increase or even stay the same.
After all, there was one part of this morning’s job report that investors actually liked. As The Wall Street Journal reports, “Wages for some of the most actively hiring sectors in November still lagged the overall inflation rate.” That is, employers are still paying employees less than they need to meet rising costs.
In Wall Street speak, that’s a good thing.
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Election season overtime is finally winding down, so Democratic operative Joe Sudbay joins David Nir on The Downballot as a guest host this week to recap some of the last results that have just trickled in. At the top of the list is the race for Arizona attorney general, where Democrat Kris Mayes has a 510-vote lead with all ballots counted (a mandatory recount is unlikely to change the outcome). Also on the agenda is Arizona's successful Proposition 308, which will allow students to receive financial aid regardless of immigration status.
Over in California, Democrats just took control of the boards of supervisors in two huge counties, Riverside and Orange—in the case of the latter, for the first time since 1976. Joe and David also discuss which Democratic candidates who fell just short this year they'd like to see try again in 2024, and what the GOP's very skinny House majority means for Kevin McCarthy's prospects as speaker.
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