Commentary
Everybody loves to see egg all over the faces of experts, but the
blowout of the Wall Street consensus forecasting 190,000 new jobs for January by an actual number of 517,000 was more yolk than anyone bargained for. The favored media meme is that unemployment, which was supposed to go up, is instead at 3.4 percent, now at its lowest since before man landed on the moon.
With nothing to compare the strange era of post-COVID-19 lockdowns to, the second-guessing is everywhere. Federal Reserve Chairman Jerome Powell, having just happily reduced the velocity of the Fed’s interest rate tightening in its fight against the highest inflation in several decades and even boasting of achieving “disinflation in the goods sector,” may have to resume increases by 50 basis points or more instead of the Fed’s latest 25 basis-point hike, its smallest since March 2021.
Analysts who were assuming that a recession was imminent or already here are
now talking “soft landing.” Others were convinced that they were hallucinating, such as Moody’s Chief Economist Mark Zandi, who wrote in a
tweet that the Department of Labor’s Bureau of Labor Statistics’ jobs report was “so strong” that he didn’t believe it. University of Michigan and Brookings economist Justin Wolfers, referring to economists’ recession fears during the past months,
announced that it was “the biggest mis-reading of the economy” in his lifetime.
Deutsche Bank strategist Alan Ruskin
told clients: “There is a feeling that the labor market just does not fit with multiple other weak growth signals. ... At a minimum this data will demand traders retreat and regroup.”
The leisure and hospitality sector experienced the greatest
job growth, totaling 128,000 positions filled. Other services were next, professional and business coming in at 82,000 and health care at 58,200. But at the same time, the rate of increase in wages is slowing. And there are now close to two jobs for every prospective employee, while current employees remain
finicky about leaving the comfort of home telework to return to the office.
Then there’s the juxtaposition of major layoffs at tech companies. Amazon, Google parent company Alphabet, Meta, Microsoft, and Twitter are eliminating sizable numbers of jobs, beginning late last year and continuing into this year. PayPal plans to cut 2,000 workers, software firm Splunk will cut 4 percent of its workforce, online security company Okta is cutting about 5 percent of its jobs, Pinterest is laying off a considerable number, and Miro is showing the door to about 7 percent of its employees.
Checking back in with the experts, we hear the significance of tech’s downsizing minimized, explained away as readjusting post-COVID.
“Tech is omnipresent in our lives, so it feels like it should be omnipresent in our labor market, but that’s not necessarily the case,” labor economist Kathryn Edwards
told ABC News.
How comforting is it that the superpower that reached the moon and won the Cold War is boasting about employment growth in the service sector while cutting-edge jobs are shed? The Oxford English Dictionary
defines “McJob,” a term originally used against Presidents Ronald Reagan and George H.W. Bush, as “an unstimulating, low-paid job with few prospects, especially one created by the expansion of the service sector.”
It seems that this jobs report was as unexpected by those who watch the economy for a living as the high inflation that seemed to be triggered by Joe Biden taking the oath of office at the beginning of 2021. It feels like a plane whose pilots are unaware of its airspeed, its altitude, and its direction and destination. And when an aircraft climbs at an unexpectedly steep rate, it risks entering a high-altitude aerodynamic stall that can quickly lead to it crashing to earth.
Could it be that the Amazons, the Googles, the Microsofts, and the PayPals, which transformed our lives with their technological innovations, have a better sense of today’s economy than those in the hospitality business? Will Powell play the role that the co-pilot of Air France’s ill-fated Flight 447 in 2009 did, misreading an unusual, unprecedented set of circumstances in the cockpit and reacting at the plane’s controls by executing the opposite of the proper procedures? The result, far from any soft landing, is a total loss of control and the jetliner going from the highest in the sky it had ever been to speeding down into the ocean in the course of fewer than four minutes.
To raise these concerns isn’t to urge the Federal Reserve to go soft. But it wasn’t the false scapegoats of COVID-19 and Vladimir Putin who signed
trillions of dollars in inflationary new spending. It was President Joe Biden who gave us an economy so out of whack that apparently no one can read it accurately. So it’s best to tread carefully.
