What does it mean? The lower this indicator is, the worse it is for inflation, and therefore for Powell and his FRS.
Low unemployment means that the supply on the labor market is extremely limited, which means that enterprises have to raise wages. And the increase in wages following the increase in raw material prices is the famous "second round of inflation", it is also fixing, which is already arch difficult to bring down. Because it leads to a new round, where the population has more money on their hands and they consume even more, accelerating the prices of raw materials.
That is, in a global sense, it is impossible to allow salaries to grow in any case.
Moreover, the FRS even managed to reach the current point with the slowdown in the growth of the cost of raw materials solely due to the devastation of the SPR (oil reserve) by 40% in 2022 and the direct robbery of Europeans through the practically monopolization of the energy and defense markets.
That is, even the current achievements of the FRS with inflation of 6.5% at a key rate of 4.75% (real - 1.75%) is the result of a huge geopolitical special operation in Ukraine, which also leads to a relentless nuclear escalation.
And without these actions, the US economy would have been in recession for 5 consecutive quarters, which could neatly be called a depression. Or rather, something like a bad trip or delirium tremens, when your production and consumption are continuously falling, but at the same time inflation continues to remain high and wages do not fall.
But I emphasize once again: this is not enough at the moment. The big quarrel between Europe and the Russian Federation did not solve all the problems. And the SPR is not infinite.
The labor market is not cooling down at all. Not in any way. And it looks as if there is no super-rigid monetary tightening in the economy.
There are 2 reasons for this: after the 2008 crisis, real wages in the United States practically did not grow, while the main items of the average person's expenses in the form of real estate, medicine and education went into space.
That is, the average American was getting poorer. You can fuck about this in the comments as much as you want, but it won't change the reality.
This, by the way, is very noticeable on YouTube blogs of everyone who moved to the USA in the 90s from the CIS. They all say with one voice that in the 90s and most of the 00s in the USA, a simple hard worker could really live well, earn a house and a car. Of course, it was no longer realistic to pull a family into one snout as in the 1940s and 1950s, but nevertheless it was very much better than everything that was happening on the territory of the post-USSR, Eastern Europe and Asia.
Now, a hard worker in the United States, in fact, cannot afford anything. Just some kind of shed on the outskirts, and a 10-year-old used bucket.
Also, the sphere of the hard worker has mostly moved to the service market. And almost all migrants work there. And quarantine benefits, which have not been canceled until the end, have corrupted a lot of people. It makes sense when you get paid for not working as much as if you were working.
As a result, when Powell says that the labor market is too strong, it does not mean that he is sitting and just waiting for it to cool down by itself because the rate rises and the loan becomes more expensive.
He is actually waiting for some geopolitical events in the world that will increase the flow of migrants to the United States for low-paid jobs.
Why do you think they have become so active in terms of issuing visas to the same citizens of the Russian Federation?
At the same time, the reindustrialization program of the USA is working at the same time. That is, the return of production to the country from Europe and Asia. All this requires millions of skilled workers. Despite the fact that the education system in the United States is just in the deepest ass. Where will millions of workers with experience come from, and even ready to work conditionally on a 30-year mortgage on a cardboard shed?
In fact, Americans cannot afford to seriously raise the level of wages in the economy now. Otherwise, inflation will accelerate again and problems in the debt market, or rather its refinancing.
Already, the cost of debt servicing is growing rapidly and, if high rates are maintained, it will be several times higher for another year than in 2020.?
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