The Jobs Report is out for November and it is really good. Matt Yglesias provided a good overview of it, A Dominant Jobs Report. As he noted, the surface of the report is good news: 321,000 jobs added in November. “Dig a little bit deeper, though, and you see even more good news.” On the other hand, Dean Baker (Gloomy but correct!) would doubtless tell us that at this rate it would still take us years to reach full employment. Regardless, it is a good jobs report.
As a result, I’m worried. One of the best things in the jobs report is that we are finally seeing some wage growth: hourly wages went up by 9¢ this month. That’s great news all by itself. But the Federal Reserve is just itching to raise rates to head off inflation. You know: it is much better to kill an economic recovery than risk even the smallest amount of inflation that would hurt the rich rentiers. And the most liberal position on the Fed is that we should wait until wages start to rise before putting a great big drag on the economy.
Not surprisingly, I see it differently. I think that American workers have been suffering in a big way for the last six years. At the same time, the owners of capital have done extremely well. So the Federal Reserve should — For a change! — error on the side of the American worker. It should allow reasonable levels of actual inflation. I am so tired of the Fed constantly slamming the brakes on the economy before we see inflation. The justification for this is that inflation can quickly get out of control. But when have we seen this? It is ridiculous to suggest that if inflation went up to 3%, the Fed would be at a loss to do anything about it.
For the record, I think the Federal Reserve inflation target should surely be 3%. In fact, I’ve never heard a reasonable argument for why it shouldn’t be 4%. The truth is that over the last six years, the inflation rate has been below the ridiculously low target of 2% over 60% of the time. And the 2% inflation target is not based upon anything. It was just a number that Alan Greenspan made up. And his reason for doing so would not sit right with most economists. He claimed that the inflation measures overstated actual inflation so that 2% inflation actually represented zero inflation. Zero inflation is bad for workers and the economy; it is only good for the already rich.
This morning, Paul Krugman also argued for caution from the Fed. In fact, he gave what I think is infinitely reasonable advice, “So still: the Fed should wait until it sees the whites of inflation’s eyes — and by inflation I mean inflation clearly above 2 percent, and if I had my way higher than that.” But sadly, I don’t think any level of rational argument will matter. The clearest proof that our government is an oligarchy is found with the Federal Reserve. Not only does it give money away as long as the recipient is rich enough, it has never seen its purpose as being anything but helping the rich. The only good thing I can remember the Fed doing was under Greenspan where he allowed unemployment to get much lower than more establishment figures (like Janet Yellen) thought wise. And I don’t think he did that because he was concerned about the American worker.
Hopefully, the Federal Reserve will not act as stupidly and cruelly as is its tendency. But you can depend upon many people screaming about raising interest rates. One thing is pretty clear. The Fed has signaled that it will raise interests in mid-2015. The good jobs report today makes that much more likely.
Update (7 December 2014 10:06 am)
As expected, Dean Baker wrote, “To get back to the labor market of the late 1990s and 2000 we would need 3.5 years of November’s growth.”