"Fed Whisperer": Low Employment Growth May Become the New Normal, But Particularly Vulnerable in the Context of War

Odaily reported that "Fed Whisperer" Nick Timiraos wrote an article pointing out that March saw an addition of 178,000 jobs, reversing the significant decline from the previous month, February. The unemployment rate also dropped to 4.3%. However, some details are not optimistic, as wage growth for ordinary workers slowed to the lowest year-on-year increase in the five years since the post-pandemic recovery. Averaging these two volatile months provides a clearer view of the underlying trend: a monthly average of only 22,500 new jobs. Two years ago, adding 22,500 jobs per month would have been enough to raise alarms; today, such a level might still be considered acceptable. Fed officials are still working to explain this change.

San Francisco Fed President Daly wrote on Friday: "It is not easy for the public to understand that an economy with zero job growth is still consistent with full employment." This situation is particularly vulnerable if new supply shocks strike again. If the war with Iran persists, high fuel costs or commodity shortages squeeze businesses and consumers, the labor market will lack a buffer to absorb the shock. Meanwhile, the Fed's policy space is also more limited as inflation concerns may weaken the certainty of interest rate cuts. (Jin10)