Trick or Treat Economy

from Maudlin Economics,

The US jobs report was expected to be strong after a few weak months. This might make the Federal Reserve’s decision to start tapering look well-timed... Key Points: October US payrolls grew 531,000, more than expected. The two prior months had upward revisions totaling 235,000. The headline unemployment rate fell to 4.6%, getting closer to the 3.5% pre-pandemic level. The disappointing news is the participation rate which held at 61.6%, vs. 63.3% in February 2020. Average hourly earnings rose further, with wage growth in the leisure/hospitality segment still particularly strong. After losing 22.3 million jobs in March/April 2020, the US economy has now added back 18.2 million jobs. Bottom Line: The labor market remains tight, the Fed’s idea of “tightening” is to expand its balance sheet another $500 billion over the next 8 months and still keep short rates at zero. More reports like this one may force the Fed to tighten faster than markets presently expect.

...nutshell opinion: We are facing demand-driven inflation as a consequence of misguided monetary policy and misdirected fiscal stimulus. Those aren’t the only problems by any means, but they are the main ones. We may face the worst policy-induced economic calamity since the Smoot-Hawley tariffs triggered the Great Depression. But even if not calamitous, it will be bad. Those in power have slowly but surely painted the economy into a corner. Every option is bad. All tricks, no treats.

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