This is actually bad news because a super-hot labour market tends to lead to higher inflation; forcing the Fed to artificially slow down the economy even more and increasing the chances that they land with a recession.
Is it a law of nature that whenever workers do well, the Fed has to curb it? That seems like a deliberate policy choice made not with the average person's interests at heart.
> Is it a law of nature that whenever workers do well, the Fed has to curb it? That seems like a deliberate policy choice made not with the average person's interests at heart.
It is a less-spoken about flaw of the economic system we live in.
In a resource-constrained planet, we just cannot have too many people demanding too many resources. Under the current system, most people cannot consume above average resources except a few successful capitalists and systematic holders of power.
The fed is merely trying to reduce inflation but the society is structured in a way such that only the common man suffers inordinate costs to their lives. The select few people have entrenched their positions in society, thus they will never suffer extreme consequences in a fed induced downturn.
This systematic disproportionate affect is what causes unrest in society. If the wealthy lost money proportionate to their gamble and literally fell on the streets, shoulder to shoulder with the commoner, most people wouldn't have a problem with a fed downturn.
>If the wealthy lost money proportionate to their gamble and literally fell on the streets, shoulder to shoulder with the commoner, most people wouldn't have a problem with a fed downturn.
Isn't that exactly what happens when the stock values go down? That most don't end up on the street isn't a result of any magic tricks, but of diversifying investments. So if Amazon goes to shit during an upcoming recession/depression, I would assume that Bezos has more than enough money parked in real estate or other assets.
Diversifying investments helps the rich for sure. It is the wise choice to make.
But the real problem is bailouts and cheap loans for the rich to cruise through the downturn while the ordinary person will likely lose their job and healthcare.
>But the real problem is bailouts and cheap loans for the rich to cruise through the downturn while the ordinary person will likely lose their job and healthcare.
While I agree with the idea that government shouldn't give bailouts, I don't see how obtaining cheap loans when one has sufficient collateral to wager is a problem. Banks tried subprime lending before and the result was a global recession and a tighter grip on the financial industry.
As a worker there is no way to do well. If there is no rise in wages all of the benefits of automation and efficiency improvements go to other inputs/outputs, if anything starts to raise wages the fed kicks in.
Maybe we have to see where things land between real interest rates, inflation and wages growth by figuring out how to relax all of this cheating over time.
Well that would be bad as the Chinese economy is going to get started meaning gas prices among others are heading way up -- as it will buy more of Russian oil -- which will impact also the U.S. indirectly. In essence the Fed at best is going to achieve move of wealth to China.
The good news is that supply of a lot of products should ramp up. Now how and when these products are going to make it to the markets is another question.
It seems possible that no matter how much interest rates are raised, that this time the workers are not going to come back and companies will need to keep hiring and competing for workers. Current layoffs seem to be being absorbed with little effect on reducing wages or hiring. Many people are assuming things still work the way they used to, and they may not. Raise rates = reduce employment = lower wages always assumed "all other things being equal" and all other things are not necessarily equal any more. Time will tell. If the Fed keeps pushing rates higher and there remains a lack of workers then a lot of market destruction could occur and inflation may not come down. There are many current causes of inflation world wide and US interest rates will not have an effect on a lot of them.
