Have you seen the great jobs report this month? The economy added 295,000 jobs. The unemployment rate went from 5.5% to 5.3%. Wow! Happy days are here again! There is literally a chicken in every pot. Unfortunately, most Americans lost their pots when the bank foreclosed on their houses. All right, maybe not. It isn’t a bad jobs report. It’s a mixed bag. That 295,000 number is impressive, but it is still less than the number of people who gave up looking for a job last month. And it is still true that we need a lot more months of job growth like this to get back to our pre-crash levels of employment.
Job reports these days are very much a double edge sword. We want to see good numbers — more job growth. But the better the numbers, the more it brings out all the austerity fools who claim that the Federal Reserve must raise interest rates because inflation is going to increase. This is said based entirely on theory. There is no indication that inflation is actually increasing. As I’ve noted many time before, the reasoning here is that it is better to deprive workers of jobs than to allow the rich to face even the threat of inflation.
So the lower the unemployment rate gets, the louder the screams from the finance types will be that the Fed must raise interest rates. But here’s the thing: the Federal Reserve has a 2% inflation target. I think this is too low. It is basically just something that Alan Greenspan pulled out of the air. And now it has become some kind of iron law of economics — which should tell you a lot about just how scientific economics is. But the target is 2%. The problem is that more and more it isn’t even a target — it is an upper bound. In a really good blog post yesterday morning, Paul Krugman cautioned the Fed:
He is making the case that inflation that is too low represents a much more serious threat to the economy than inflation that is too high. But it is pathetic that he has to remind these people of this. If the Fed’s target is 2%, then it should be above 2% about half the time. But that hasn’t been the case since 2009. And the power elite love this. It’s just a reflection of the fact that working people are doing really poorly. But the rich don’t care about that. Their piles of money are worth a lot and they want it to stay that way. Deflation would be even better for them.
This is the problem with an oligarchy. Our leaders are not, in general, doing what is best for the economy. Or at least, not what a reasonable person thinks is best for the economy. They’ve defined what is best for the economy as what is best for the rich. And so every month we have this fight about the jobs report. If it’s good, the rich tell us the Fed must do something because they will get very slightly less rich. And if it’s bad, well, it’s bad. Of course, even when it is bad there are some who argue for raising interest rates. Who cares if American workers have jobs? Have you seen the price of yachts recently?!