Unemployment hits 50-year low in US, but inflation is bent but not broken
US unemployment figures fell to a 50-year low in December, in the surest sign of economic recovery from the debilitating impact of the Covid-19 pandemic and, more recently, from the global oil price surge caused by from the war in Ukraine. But inflation remains a stubborn challenge.
US President Joe Biden understands this and reminded the country in remarks Friday as he celebrated the new jobs report.
“Today’s report is great news for our economy and more evidence that my economic plan is working. The unemployment rate is the lowest in 50 years. We just completed the two strongest years of job growth in history. And we’re seeing a transition to steady, sustainable growth that I’ve been talking about for months,” he said.
But Biden warned: “We still have work to do to lower inflation and help American families feel the cost-of-living squeeze. But we’re moving in the right direction.”
Inflation stood at 7.1 percent for the 12 months ending in November, according to the latest count from the Labor Department; a new assessment is expected later in January.
The US Fed’s intervention began last June after inflation rose to a 40-year high of 8.6 percent, with a massive rate hike of 0.75 percent, the highest since 1994. Six more increases would follow over the next month of varying sizes, the last of which was half a percentage point in December.
The purpose of these increases is to curb spending by making credit expensive. But there are fears that they could end up limiting production – if consumers don’t buy, companies won’t have much to sell and will cut production – and slow the economy, triggering a recession.
The Fed is set to announce another rate hike after the Jan. 31-Feb. 1 meeting of its top decision-making body. But there are indications that increases could be smaller in the quarter percentage point range, according to minutes of the body’s December meeting that were released this week.
“Most participants emphasized the need to maintain flexibility and optionality when shifting policy to a more restrictive stance,” the minutes said, indicating that Fed officials were prepared to cut growth.
But the increases will continue. “Participants reaffirmed their strong commitment to returning inflation to the (Federal Open Market) Committee’s 2 percent target,” the minutes said. “A number of participants emphasized that it would be important to clearly communicate that a slowdown in the pace of rate increases was not an indication of any weakening of the Committee’s resolve to achieve its price stability objective.”
The Biden administration also took a crack at inflation — through the ambitious $370 billion Inflation Reduction Act, which aims to cut the deficit with higher taxes on the super-rich, expanded health care benefits, lower prices for some prescription drugs and a historic investment in clean energy.
The real battle with inflation, meanwhile, has continued to be fought at gas stations and grocery stores. Gas stocks continue to rise and fall, driven by the war in Ukraine, despite several rounds of releases from US strategic reserves ordered by President Biden.
A direct consequence of the economic uncertainties – not only related to inflation – has been the massive layoffs in the technology sector, starting with Facebook and Twitter in November. More than 125,000 tech workers laid off in 2022. And counting — Amazon announced Thursday that it will lay off 18,000 workers, its biggest cut ever, and a day after online clothing company Stitch Fix lay off 20 percent of its staff and crypto. borrowed Genesis said it plans to cut 30 percent.
These tech companies were aggressively hiring during the Covid-19 pandemic, as people’s internet usage peaked as they worked, studied, shopped and played remotely from home. The return to normality has left these companies with bloated staffs that have become increasingly volatile – more so as fears of an economic downturn emerged.
Among them are many Indian H-1B visa holders. The layoff has been traumatic for them because it spells the end of their stay in the US if they fail to find another employer within 60 days. For those in line for Green Card – US permanent residency – who have been in the US for much longer face an even more devastating situation, their children, who were born and raised here, have not known no place like home.
They have a fairer chance of finding alternative employment in an improving labor market, as reflected in record unemployment figures. Industry experts are predicting better career options for tech professionals in non-tech companies, such as in the healthcare and hospitality sectors, for example.