OPINION: Fewer hours worked plus smaller pay raises mean the Federal Reserve has weakened the labor market and licked inflation.
Job growth is slowing, wage growth is slowing, and the number of hours workers are putting in is actually falling. With the inflation rate declining rapidly, it’s time for the Fed to step back and allow the economy to glide in for the soft landing that everyone wants.
Markets do the Fed’s job The slowdown in the economy has largely been accomplished by the financial markets driving bond yields TMUBMUSD10Y, 3.562% higher and stock prices SPX, +2.28% DJIA, +2.13% lower. But if financial markets were to believe that the Fed is wavering, then stocks and bonds would rally and all the good work the Fed has accomplished in corralling inflation would be lost.
In December, private-sector companies added 220,000 workers, but the total number of hours worked in the private sector fell at an annual rate of 1.1%, the second decline in a row. This is a key leading indicator of growth, because output depends in part on the total effort made by workers. That means inflationary pressures from wages are receding, not growing. That means that the Fed has met — at least for now — its goal of preventing a wage-price spiral that would keep inflation unacceptably high.
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