On Friday, we got the new jobs report. Usually, I anxiously await the first Friday of the month, but I’ve gotten to see it as pointless. I want to see good numbers — for the economy to continue to create jobs. But what does it matter? We really do not live in a democracy; we live in a plutocracy. And that is nowhere as clear as it is with the Federal Reserve. It is a group half made up of people whose only qualification is that they are rich. And these people aren’t looking out the best interests of the country — much less the American worker.
So if the economy looks like it might be taking off — like workers might be able to demand a more just share of the nation’s productivity — the Fed is right there to stop it. After years during which the rich capitalists have made scads of money and workers have seen their pay stagnate and even decrease, the Fed is unwilling to allow even a hint of “dangerous” inflation that might hurt the rich. It has now be years that the Fed has been wanting to raise interest rates. And they have quite literally been looking for any excuse to do it. The data do not drive the policy; the data are just tools of Fed apologetics.
Consider that the standard U3 unemployment rate is 5%. Back in 2000, Janet Yellen was certain that this was full employment — the level that you do not go below for fear of accelerating inflation. But Alan Greenspan — admittedly a bit of a crank — said no and allowed unemployment to get down to 3.9%. You may remember that period as the last time you got a raise. And there was no accelerating inflation. So hooray! We learned something: 5% is not full employment.
But it is 15 years later, and now Yellen is in Greenspan’s position. But apparently, she learned nothing from the past. Or, she is just a hack for the financial industry — which is probably the more accurate reading of it. I’m not saying that full employment would be 3.9% now. I don’t know what it is. But the truth is that there is absolutely no sign of inflation, yet we are looking at raising interest rates. Why? Sad to say, a lot of it has to do with this fact: the last time the Fed raised interest rates was June 2006. It’s like people are unnerved by this or something — like they aren’t aware of just how bad the collapsing of the housing bubble was.
I listened to the beginning of Marketplace on Friday. In the segment about the jobs report, Linette Lopez of Business Insider is obviously giddy about the Fed raising interest rates. Sudeep Reddy of The Wall Street Journal just seemed to be resigned towards it. Regardless, lots of people are going to go without jobs because the Fed is going to raise interest rates. But none of these kind of business reporters seem all that aware of it — or at least care about it.
And it is worse than I’ve stated. As Dean Baker noted, in addition to an unchanged unemployment rate, “There was also no change in the labor force participation rate or the employment-to-population ratio, both of which remain far below pre-recession levels.” So the truth is that there is incredible slack in the economy. But the Fed must raise interest rates, because the rich might lose a couple of pennies. And besides, they haven’t raised rates in such a long time!