The US Job Market Just Won't Quit

The US Job Market Just Won't Quit

Biden in Florida
By Yuval Rosenberg and Michael Rainey
Tuesday, November 1, 2022

Welcome to November and the final stretch of the midterm elections. Here’s what we’re watching while we wait for the World Series to resume.

Social Security? Inflation? Dems Still Searching for a Winning Election Message

With Election Day a week away, President Joe Biden headed to South Florida on Tuesday to warn — again — that Social Security and Medicare are “under siege” by Republicans and that the future of the programs is on the ballot next week.

Biden and Democrats have frequently tried to score campaign points by targeting Republican Sen. Rick Scott of Florida and a plan he released earlier this year that proposed to have all federal programs including Social Security and Medicare sunset after five years or be renewed by Congress. Some Republicans have bluntly rejected the Scott plan, but Biden on Tuesday blasted it and other GOP proposals that could change or cut Social Security and Medicare, warning that the GOP would target the programs.

"You've been paying into Social Security your whole life, you earned it, now these guys want to take it away," Biden said, later adding, “They’re going to increase retirement age for Social Security and shrink benefits. That’s what they’re moving to do.”

Biden also touted the Inflation Reduction Act, noting that all Republicans voted against the plan and its provisions to lower prescription drug costs. “This year, we finally beat pharma. We finally beat pharma,” he said. “Big pharma lost and Americans won, thanks again to the Democrats in the Congress.”

Why it matters: It’s no coincidence, of course, that Biden’s event focused on Social Security, Medicare and prescription drug costs was in South Florida, home to a huge senior population. “Democrat strategists worry that Florida, a closely contested political theater for decades, is starting to decidedly lean Republican,” Reuters’ Nandita Bose and Trevor Hunnicutt report. “They hope that they can push back against those trends by making a campaign issue out of purported risks to the popular Social Security and Medicare programs under Republican leadership.”

Yet Biden’s speech was “sparsely attended,” Reuters notes, and the president’s low approval ratings are weighing on Democrats’ congressional prospects. Some top Democratic lawmakers and strategists are now “openly doubting” the party’s election strategy, The New York Times reports.

“For weeks, Democrats have offered a scattershot case of their own, accusing their opponents of wanting to gut abortion rights, shred the social safety net and shake the foundations of American democracy,” the Times’s Lisa Lerer, Katie Glueck and Reid J. Epstein write. “Yet as the country struggles with high gas prices, record inflation and economic uncertainty, some Democrats now acknowledge that their kitchen-sink approach may be lacking. … Others say there has been too much focus on abortion rights and too little attention on worries about crime or the cost of living. And across the country, Democrats point to an inadequate economic message and an inability to effectively herald their legislative accomplishments.”

The bottom line: While Biden has increasingly focused his election message on economic issues, Social Security and Medicare, other Democrats worry the party overall has said too little to address voters’ pocketbook concerns. The Times reports that “Democrats have spent nearly $320 million on ads focused on abortion rights, more than 10 times as much as the $31 million they have spent on spots about inflation, according to data from AdImpact, a media tracking firm.”

With just a week to go, it may be too late for Democrats to move the needle by shifting their messaging.

Quote of the Day

“The truth is, Democrats have done a poor job of communicating our approach to the economy. I have no idea if I’m going to win my election — it’s going to be a nail biter. But if you can’t speak directly to people’s pocketbook and talk about our vision for the economy, you’re just having half a conversation.”

— Rep. Elissa Slotkin, a Democrat from Michigan who is facing a tough race to hold her seat. Slotkin and other Democrats have criticized their party’s lack of a focused message in the midterm elections, taking instead what Lerer, Glueck and Epstein of the Times call a “kitchen-sink approach” to issues including abortion rights, crime and inflation. “For months, Republicans have slammed their opponents with a far simpler message: The economy is bad, worries about crime and immigration are rising and the party in control is to blame,” they write.

Labor Market Shows Continued Signs of Strength as Fed Kicks Off Meeting

Employers posted more job openings in September than expected, according to Labor Department data released Tuesday, signaling that the labor market is still quite robust as the Federal Open Market Committee meets to determine the size of the central bank’s next interest rate hike.

Analysts had expected to see another monthly decrease in job openings, continuing the trend from August. Instead, employers posted 437,000 new positions in September, increasing the number of available positions to 10.7 million. Job openings in the health care industry rose to a record high, as did the number of positions posted by major corporations.

“The surprise pickup in vacancies highlights unrelenting demand for workers despite mounting economic headwinds,” Bloomberg’s Reade Pickert says. “The persistent imbalance between labor supply and demand continues to underpin robust wage growth, adding to widespread price pressures.”

Still, despite the topline jobs number, the report provides some evidence that the Fed’s anti-inflationary tightening campaign is starting to work, as the number of new hires and job quitters moved lower. “Make no mistake: the labor market is cooling,” said Julia Pollak, chief economist at ZipRecruiter. “The job openings figure can be volatile, but the less volatile number of hires fell from 6.3 million to 6.1 million, and the number of quits slid from 4.2 million to 4.1 million.”

Pollak also noted that job openings in finance and insurance have fallen for two straight months, with high interest rates “clearly taking a toll on hiring in the sector.”

The Fed mulls its next move: As it continues to wage its war on inflation, the FOMC is expected to announce a fourth consecutive 75-basis-point increase in its benchmark interest rate when it concludes its November meeting on Wednesday, raising its target rate to between 3.75% and 4%. Nothing in the latest jobs data suggests it will hesitate to do so. The bigger issue is what comes next.

Some analysts said the September report makes it more likely that the Fed will continue to push hard on rates into next year. But others have argued that the Fed will pivot to a less aggressive stance at the final FOMC meeting of the year in December, with expectations of a 50-point rate increase followed by a pause as Fed officials wait to see how their tightening campaign is playing out. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note Monday that he expects the December rate hike to be the Fed’s last. “We see enough straws in the wind now to think that the economy is at a real inflexion point,” he wrote, citing declining home sales, slowing wage growth and lower levels of corporate investment.

The September jobs data, however, tempered expectations for a Fed pivot, with the odds of a larger rate hike in December rising to slightly better than even in financial markets Tuesday. “The good news of more job openings for everyone will be bad news for everyone if Fed officials become convinced they need to push interest rates even higher and faster than before,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

A plea to slow down: Worried that the Fed will push so hard on rates that it causes a recession, a group of Democratic lawmakers sent a letter to Fed Chair Jay Powell this week expressing concern about the central bank’s plans.

The authors — who include Sens. Elizabeth Warren (MA), Sheldon Whitehouse (RI), Jeff Merkley (OR) and Bernie Sanders (I-VT), as well as Reps. Katie Porter (CA), Stephen Lynch (MA), Rashida Tlaib (MI) and Jamaal Bowman (NY) — write that the Fed’s warning that it will act “aggressively” and that people should expect to feel “pain” in the coming months as a result of the bank’s tightening campaign “reflect an apparent disregard for the livelihoods of millions of working Americans, and we are deeply concerned that your interest rate hikes risk slowing the economy to a crawl while failing to slow rising prices that continue to harm families.”

It’s not at all clear that lawmakers have any leverage with the Fed when it comes to interest rate policy, no matter what the cost of that policy may be to ordinary Americans. At the same time, there are plenty of inflation hawks urging the Fed to press ahead. Former Treasury Secretary Larry Summers said Tuesday that those pushing for the Fed to pause its tightening campaign are “badly misguided.”

“History suggests that once generated, high inflation is very hard to stop,” Summers warned. “The vast majority of efforts to stop inflation have failed in industrial countries. … If the @federalreserve doesn’t carry through on the market’s current expectation that rates will approach 5 percent, markets and others will see it as an easing.”

In an interview with Bloomberg Monday, Summers stated his position succinctly: “I hope the Fed will be clear that it is staying the course on doing what’s necessary until we see very clear signs of inflation coming down.”

The question now is whether Powell and Fed policymakers are still of a similar mind as they decide just how high interest rates will go over the next few months.

Number of the Day: $25.8 Million

Politico’s Brian Faler reports that an inflation adjustment to the estate tax could be a huge boon to the ultra wealthy next year. “The estate tax, like many other federal taxes, is indexed to consumer costs — and, because of soaring prices, the IRS says the point at which people have to begin paying the 40 percent levy next year will jump by an eye-popping $1.72 million per couple,” Faler writes.

The current estate tax exemption is $12.06 million per person. A 7% annual inflation adjustment will raise that by $860,000, lifting the total amount that couples can shield from the tax to $25.8 million.


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