why Biden’s recipe works – Corriere.it
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Fed caution
Jerome Powell, head of the central bank, however, is less optimistic: now that the prices of energy, raw materials, houses and food are cooling down, the focus, for the purpose of stable inflation containment, is all on wages and jobs. The Fed documents contain scenarios in which the cooling of prices will be accompanied by a rise in unemployment to at least 4%. Economists consulted a month ago by the Wall Street Journal forecast that at the end of 2023 there will be 4.7% of people without work. Instead, the data just published by the Bureau of Labor Statistics record another record in the fall in unemployment, down from 3.5% in December to 3.4% today: the lowest figure in the last 54 years.
The crisis in the technology sector
January’s numbers confirm what we’ve known for some time: the mass layoffs that have made headlines in recent months at Facebook, Amazon, Google, Microsoft and many other Silicon Valley companies are limited to the tech sector that had bloated too much during the years of the pandemic when these companies had hired massively to face the strong growth in demand for digital services from users who had greatly reduced physical meetings and who spent much more time at home. But these data, 517,000 more jobs in January compared to a forecast of 180-190,000, still amazed economists because employment is growing everywhere: hotels, restaurants, healthcare, public employment, schools, commerce, professional services , transport. It is even growing in industry despite the layoffs in technology and construction (+25 thousand), a sector in which experts had predicted a sharp drop due to the downturn in the real estate market, hit by home mortgages which have become much more expensive. Evidently the end of the pandemic emergency pushes many to long-delayed purchases, moves or renovations.
The exuberance of the labor market
How can this unexpected exuberance of the labor market be explained? It is probably necessary to analyze the effects of the pandemic in a more general way. The Covid emergency is over, says the head of the Federal Reserve. But Covid has left permanent changes in the economy. Up until now, those on the production side have appeared most evident: inflation fueled by chaos in the supply chain, production returning to the countries that had exported factories and jobs, America subsidizing the construction of factories using digital and environmental technologies by resorting to policy interventions unusual industrial in the homeland of liberalism. Now we are probably seeing the effects of structural changes also in the labor market: not only the temporary adjustments linked to the epidemic, the generous subsidies, smart working, but a tighter market because the coronavirus has killed half a million workers and pushed millions more baby boomerss, frightened, to retire earlier than expected. The Fed, which fears a resurgence of inflation from labor shortages and wage growth, is keeping its guard up. It continues to raise rates but at a much slower pace. Unemployment that is too low is worrying, but we realize that it is also the effect of structural changes, while the drop in the rate of wage growth (from 4.9% in December to 4.4% in January) is negative for workers, for central bankers, a positive sign.
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