Why the red hot jobs market is not a good thing...

The Tradition

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Apr 23, 2002
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(Bloomberg) — Former Treasury Secretary Lawrence Summers said he’s concerned that a slowing in headline inflation in upcoming data will prompt the Federal Reserve to conclude its policies are working, when much more action is in fact needed.

“I’m worried we’re going to see some good news on non-core inflation,” Summers said on Bloomberg Television’s “Wall Street Week” with David Westin, ahead of consumer price data due Wednesday that are set to show a retreat in inflation, thanks especially to a slide in gasoline costs. Combined with some signs of economic slowing, the danger is that that’s “going to lead the Fed to think that things are under control.”

The US economy, however, remains in an “overheated” state, as showcased by the July employment and wage figures released Friday, Summers said. A “red hot” labor market will mean “constant or even accelerating inflation,” he said.

Payrolls jumped by 528,000 in July, a broad advance that beat all estimates and was the largest in five months, Labor Department data showed Friday.

“Everything in this number says to me overheating, not yet under control, not yet on a path to being under control,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “My concern was actually magnified,” he said.

Summers highlighted that his sometime intellectual sparring partner on economics, the Nobel laureate Paul Krugman, also cautioned that it’s not time for the Fed to alter course. Fed policy makers have raised rates by 75 basis points in each of the past two meetings, in the most aggressive tightening since the 1980s.

Krugman wrote earlier in the New York Times that “the good news we’re about to get about short-term inflation isn’t evidence that the strategy has already worked, and alas (I’m usually a monetary dove), it offers no justification for a pivot toward easier money.”

Summers said the danger is “we’re going to have a situation like we did in the 1970s, where we perpetuated inflation by not doing enough to contain it.”

Stripping out food and commodities such as energy, “we have by every reasonable measure of core inflation running somewhere plus-or-minus 5%,” Summers said. “That is more than when Richard Nixon put price controls in place. That is not acceptable by any dimension.”

The former Treasury chief reiterated his criticism of Fed Chair Jerome Powell’s assessment last month that, with the latest interest-rate hike, the central bank had already reached a “neutral” setting — where it’s neither stoking nor restraining consumer prices.

“I don’t think the Fed has the thread right now,” Summers said. Without significantly boosting real interest rates — which are adjusted for some gauge of inflation — “then we’re just setting the stage for stagflation,” he said.

 

BlackNGoldBleeder

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Jun 23, 2017
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(Bloomberg) — Former Treasury Secretary Lawrence Summers said he’s concerned that a slowing in headline inflation in upcoming data will prompt the Federal Reserve to conclude its policies are working, when much more action is in fact needed.

“I’m worried we’re going to see some good news on non-core inflation,” Summers said on Bloomberg Television’s “Wall Street Week” with David Westin, ahead of consumer price data due Wednesday that are set to show a retreat in inflation, thanks especially to a slide in gasoline costs. Combined with some signs of economic slowing, the danger is that that’s “going to lead the Fed to think that things are under control.”

The US economy, however, remains in an “overheated” state, as showcased by the July employment and wage figures released Friday, Summers said. A “red hot” labor market will mean “constant or even accelerating inflation,” he said.

Payrolls jumped by 528,000 in July, a broad advance that beat all estimates and was the largest in five months, Labor Department data showed Friday.

“Everything in this number says to me overheating, not yet under control, not yet on a path to being under control,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “My concern was actually magnified,” he said.

Summers highlighted that his sometime intellectual sparring partner on economics, the Nobel laureate Paul Krugman, also cautioned that it’s not time for the Fed to alter course. Fed policy makers have raised rates by 75 basis points in each of the past two meetings, in the most aggressive tightening since the 1980s.

Krugman wrote earlier in the New York Times that “the good news we’re about to get about short-term inflation isn’t evidence that the strategy has already worked, and alas (I’m usually a monetary dove), it offers no justification for a pivot toward easier money.”

Summers said the danger is “we’re going to have a situation like we did in the 1970s, where we perpetuated inflation by not doing enough to contain it.”

Stripping out food and commodities such as energy, “we have by every reasonable measure of core inflation running somewhere plus-or-minus 5%,” Summers said. “That is more than when Richard Nixon put price controls in place. That is not acceptable by any dimension.”

The former Treasury chief reiterated his criticism of Fed Chair Jerome Powell’s assessment last month that, with the latest interest-rate hike, the central bank had already reached a “neutral” setting — where it’s neither stoking nor restraining consumer prices.

“I don’t think the Fed has the thread right now,” Summers said. Without significantly boosting real interest rates — which are adjusted for some gauge of inflation — “then we’re just setting the stage for stagflation,” he said.

JFC, you just can’t handle anything positive for Brandon, can you?
 

pjhawk

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Oct 13, 2001
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LOL. Up is down, Night is Day. Typical from Summers, the guy that gets his share of responsibility for the 2010 Democratic wipeout in the midterms. Guy should just register as a Republican, there are too many plutocratic ghouls in positions of power in the Democratic party, Jason Furman is another one.
 

83Hawk

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Sep 17, 2002
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Met with my financial advisor the other day. I asked her if she thought we were in a recession. She said no…..the 2 quarter thing notwithstanding.

She did say one is coming, though, and mentioned some of the indicators. I don’t remember them all, except the price of copper. I did not know copper price is a bellwether for a recession. Copper is down 20% for the year and is officially in a bear market. Every time this has happened in the past 30 years it preceded a recession.
 

MitchLL

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Dec 26, 2018
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People cheering against this WH are hoping we have a recession, because their claims of a shitty jobs market went down in flames.

Falling gas prices further erode any valid criticism. Gains for Ukraine also hurts the Radical Right.

I expect Hunter Biden's laptop becomes relevant as righties grasp at straws.

Things are improving rapidly in this country. Some people don't like that for selfish, political reasons.

OP is a cheerleader for negative news.
 

The Tradition

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Apr 23, 2002
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I'm sorry common sense offends so many of you.

If there are 528,000 new jobs, that's 528,000 new weekly paychecks. That money will be spent on things, increasing demand, and thus putting more upward pressure on prices.

And not only were a bunch of jobs created, the wages are higher, too. So employers have to raise prices to keep up. Thus, more inflation.

Hang on to your butts, folks.
 
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MitchLL

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Dec 26, 2018
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I'm sorry common sense offends so many of you.

If there are 528,000 new jobs, that's 528,000 new weekly paychecks. That money will be spent on things, increasing demand, and thus putting more upward pressure on prices.

And not only were a bunch of jobs created, the wages are higher, too. So employers have to raise prices to keep up. Thus, more inflation.

Hang on to your butts, folks.
^^^^Talk about a fvcked up view of the world.

Those paychecks generate tax revenue and some of that $$$ is spent keeping Mom and Pop businesses profitable.

Seriously...be better!
 

SeaPA

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Dec 17, 2002
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So maybe we need to repeal some of the perks that had been given to the "job creators" since creating jobd is so bad for the economy.
 
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RileyHawk

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Aug 21, 2002
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It really irks righties like the OP and others on here when more people get better jobs. The republicans should just announce their slogan as "More Poverty Now".
 
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OrlandNole

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Nov 29, 2003
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Nashvegas
I'm sorry common sense offends so many of you.

If there are 528,000 new jobs, that's 528,000 new weekly paychecks. That money will be spent on things, increasing demand, and thus putting more upward pressure on prices.

And not only were a bunch of jobs created, the wages are higher, too. So employers have to raise prices to keep up. Thus, more inflation.

Hang on to your butts, folks.
Do you want people to go back to work? Yes or no.
 

RileyHawk

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Aug 21, 2002
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See Post #11.

Inflation will exceed the gains the workers are getting.
Lol - I'll play along. So your solution to inflation is having more people without jobs? Let's fire a bunch of labor, go into a deep recession so we can have lower gas prices. Brilliant. :rolleyes:

Growth is being impacted now by supply chain and availability of labor. More labor and supply will lead to more production and competition.
 
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Feb 9, 2013
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They're hiring because demand for products and services is very strong.

It's sort of like an upward death spiral.
As opposed to a downward death spiral, with people out of work and dependent on government aid? You know all the spin-off negative consequences of people out of work. Crime, homelessness, effect on kids, etc.

I’ll take a productive, gainfully-employed population any day. We can figure the rest out.
 

RileyHawk

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As opposed to a downward death spiral, with people out of work and dependent on government aid? You know all the spin-off negative consequences of people out of work. Crime, homelessness, effect on kids, etc.

I’ll take a productive, gainfully-employed population any day. We can figure the rest out.
This is exactly why you can't take republicans seriously. "Upward spiral" "downward spiral" - no matter what it's bad. The economy is good right now despite inflation. More people being able to afford things is good for society, but for turds like Trad it's bad because he pays more for gas. SMFH
 
Feb 9, 2013
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This is exactly why you can't take republicans seriously. "Upward spiral" "downward spiral" - no matter what it's bad. The economy is good right now despite inflation. More people being able to afford things is good for society, but for turds like Trad it's bad because he pays more for gas. SMFH
I get that the economy is in relatively uncharted territory, but more people working should never be a bad thing. Even if we pay a bit more for some stuff.
 

The Tradition

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Apr 23, 2002
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As opposed to a downward death spiral, with people out of work and dependent on government aid? You know all the spin-off negative consequences of people out of work. Crime, homelessness, effect on kids, etc.

If we don't have a soft-landing, that's what's going to happen.
 

Hawk and Awe

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Sep 15, 2012
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It would be really hard for me to get through a day if I worried about crap like this.

Or maybe it’d be easier since that must mean I don’t have any real problems to complain about?
 

torbee

HR King
Gold Member
I'm sorry common sense offends so many of you.

If there are 528,000 new jobs, that's 528,000 new weekly paychecks. That money will be spent on things, increasing demand, and thus putting more upward pressure on prices.

And not only were a bunch of jobs created, the wages are higher, too. So employers have to raise prices to keep up. Thus, more inflation.

Hang on to your butts, folks.
I am so angry more people are working and making more money while doing it!
 

binsfeldcyhawk2

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Oct 13, 2006
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“I’m worried we’re going to see some good news…”

That’s about all I needed to read from that dude…
Should have read the whole thing….Summers has been spot on.

It’s not an economists job to cheer lead….just to look at the data and give you their evaluation of it.

The inflation is transitory crew should have adhered to that.

He explains his rationale for his observation of the jobs number……

We’ll see if he’s correct.
 
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IaHawk44

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Feb 20, 2006
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I'm sorry common sense offends so many of you.

If there are 528,000 new jobs, that's 528,000 new weekly paychecks. That money will be spent on things, increasing demand, and thus putting more upward pressure on prices.

And not only were a bunch of jobs created, the wages are higher, too. So employers have to raise prices to keep up. Thus, more inflation.

Hang on to your butts, folks.
Seems demand put upward pressure on management to hire 528,000 Americans.
 
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StormHawk42

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Nov 3, 2009
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OP’s title is incorrect. People having jobs is a good thing.

But like all good things, there will be an unintended drawback, which is inflation staying higher longer.

It’s a delicate dance the Fed will have to do but at the end of the day, I’ll take a good jobs report and I think most will, unless you’re a Fox patron.