"Federal Reserve mouthpiece": Low employment growth may become the new normal, but it is especially fragile in the context of war

Deep Tide TechFlow message, April 04, “‘The Fed’s megaphone’ Nick Timiraos wrote that March added 178k jobs, reversing the sharp drop seen in February prior to that. The unemployment rate also fell to 4.3%. But some details are not very encouraging: wage growth for ordinary workers slowed to the lowest year-over-year pace in the five years since the post-pandemic recovery. Averaging these two more volatile months makes it easier to see the underlying trend: average monthly net job gains are only 22.5k positions. Two years ago, adding 22.5k jobs per month was enough to raise concerns; and today, this level may still be seen as acceptable.

Federal Reserve officials are still working to explain this shift. San Francisco Fed President Daly wrote on Friday, “It isn’t easy to help the public understand that an economy with zero job growth is still consistent with full employment.” With fresh supply shocks arriving again, this situation is especially fragile. If the Iran war continues, high fuel costs or shortages of goods could squeeze businesses and consumers, leaving the labor market without a buffer to absorb the shock. At the same time, fears about inflation could weaken the certainty of rate cuts, further limiting the Fed’s policy space. (Jin10)